21 Jan Reimagine Procurement and Deliver Sustainable Supply Chains
Too many businesses underestimate the importance of procurement, but recent events have highlighted that they do so at their peril. The disruption caused by both Brexit and Covid-19 proves just how fragile supply chains can be and how critical they are to operational and financial performance. Companies across the UK must respond to the “new normal” by building greater resilience and sustainability into corporate strategies. Procurement is key to that success and will play a pivotal role in allowing business leaders to respond to the challenges ahead.
Supply chain management should always sit at the heart of strategic decision making. At a time when systems and resources are stretched to their limit, reimagining procurement is more important than ever.
The Misconception of Procurement
Firstly, business leaders must recognise the impact procurement has on the bottom line. Unfortunately, many harbour misconceptions about the role it plays and regard it merely as a buying function burdened with the administration of raising purchase orders and chasing supplier deliveries.
This lack of understanding needs to be tackled head on. It is useful to get back to basics when evaluating any business function. Approximately half of revenue is spent in the supply chain and when you start from that premise, it becomes easier to re-examine priorities.
If supply chain spend constitutes 50% of revenue, then finding more sustainable and efficient ways of managing that spend will invariably provide a major boost to profits. Indeed, once people begin to unravel what procurement is really about, they see that it feeds into every facet of an organisation and as a consequence, is integral to business transformation.
Putting Procurement at the Heart of Business Strategy
Once decision makers wake up to the value of procurement, the next step is to maximise its potential. Key to that is developing a procurement strategy which is aligned with corporate values and objectives. That synergy will unlock the true potential of procurement and allow businesses to steal a march on the competition.
As highlighted by this article https://www.mckinsey.com/business-functions/operations/our-insights/reimagining-procurement-for-the-next-normal, there are 5 keys steps to reimagining procurement:
Strengthen supply chain resilience
- Multi-sourcing, BCM plans
Zero-base category strategies
- Create or rethink strategies
- Create value
Develop supplier relationships
- Explore opportunities to collaborate
- Develop performance-based contracts, or least get contracts that drive your business agenda
Accelerate digital and analytics adoption
- Digitize procurement
- Leverage spend analytics
Transform operating model and teams
- People-focused strategy and development
Those businesses that adopt sustainable procurement strategies and practices will see significant benefits. When spearheaded by a proficient and capable team, these practices can transform the business function. They can deliver cost reduction in excess of 15%, reduce business interruption and create value throughout the operation.
APS has a range of programmes that can support you on your journey in building a more sustainable and resilient business. These include cost reduction, supplier performance, supply chain risk, transformation, and the digital enablement of strategic procurement through our software i-QMN.
We hope you’ve found this information useful, if you have any questions or would like further help or advice, please contact us on 0330 311 2601 or [email protected]