Is Your Procurement Process Up to Snuff?

August 11, 2015

skyscrapers

Today, we wanted to share with you a great white paper written by Mohommad Faridy, a Strategic Sourcing professional who provided us with a great recent guest blog about negotiations. Mr. Faridy is one of the most innovative and accomplished Strategic Sourcing professionals in our network, and he’s written this new report to help organizations understand how process efficiencies can lead to huge strides in Procurement cost savings.

The whitepaper is entitled “Procurement Process Innovation: How to Identify Cost Savings and Reduce Spend by Boosting procurement Efficiency.” It’s very helpful for understanding how to achieve Procurement cost savings through process improvements.  

According to Mr. Faridy, the three main factors driving Procurement inefficiency are: lack of definition (whether the function is strategic or tactical), decentralization, and manual processes.

Mr. Faridy goes on to outline how these factors can lead to distinct inefficiencies in Procurement including: multiple individuals assuming the role of buyer, a waste of time finding contracts, failure to negotiate volume discounts with suppliers, buying the same products from multiple vendors, and others. He then goes on to describe how enterprise adoption of certain end-to-end technological platforms often leads to inefficiencies in the Procurement process, and extra costs for organizations.

By now, most companies recognize that strategic procurement offers huge benefits to all types of organizations both small and large. Procurement functions are a combination of people, process, and technology. What Mr. Faridy offers is an understanding of how, while people and technology are often the most visible components in a procurement organization, process can ultimately be the most impactful in a business transformation.

Personnel change may result in short term gains by way of staff reduction,” the report says. “But those gains will quickly erode once new people are forced to use the same inadequate tools and broken processes.”

“Similarly, investing in new technology which will require even further investment by way of training and implementation, without first establishing the process within which this technology is to work, will create redundancies and overhead as the organization struggled to force the technology to fit into a process that’s not ready for it.”

“Of the 3 areas where change is most likely to occur, process is the most impactful yet least regarded when an organization is conducting a transformation.”

So how do organizations look at process to drive cost-savings and achieve meaningful change within a business’s Procurement function? Mr. Faridy provides a detailed, easy-to-follow checklist for how to evaluate and update an organization’s Procurement processes, covering all angles of the Procurement function including: Purchase requisitioning, contract management, purchase order approval, and supplier management.

Mr. Faridy’s report will be tremendously valuable for any organization looking to improve their Procurement function through process rather than expensive technology solutions that might not pay dividends. Besides that, it’s well-written, well-designed and easy to understand even for individuals who aren’t well-versed in strategic Procurement. We highly recommend it!

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