Monday, January 28, 2013

Procurement: An Important Cog

How procurement became important 

During 1990s procurement was considered a back-office activities like dealing with requisitions, bidding, order placement, receiving orders and payment. Steadily, it has moved into section of strategic activities and  as important as a value add to organization. Procurement is a primary face to suppliers. It usually take a static view of business requirement which decides cost but its main goal is to deliver products and provide service which satisfy end-customer demand. It is now more crucial because of short cycle time, lead in product innovation, enhanced quality of products which require collaboration with sales. Procurement  decision may not receive the deserving recognition due to shared bottom-line. But again leaders have realized its importance when global sourcing and outsourcing came in picture.

Bridging the gap
A.T. Kearney's studies have shown that better supplier relationship management processes can help in improving innovation and growth, better managed risk and improved supply chain. Optimal example of global procurement effort was shown by Adidas, when it delivered 145,000 Greece team jerseys across Europe after Greece unexpectedly won Euro Cup in 2004. This flexibility is possible by -

(1) Better demand planning : Maintaining end-customer’s demand transparency
(2) Inventory planning: Collaboration to balance between redundancy and stocking  of products
(3) Lead-time optimization: Quick response to change in customer's demand
(4) Product life cycle management: Product management ensures rigorous ramp-up and ramp-down of production
(5) Footprint : Align each supplier’s footprint with the customer’s supply chain strategy
(6) Capacity planning: Risk mitigation strategy to get an additional or alternate supplier when needed

The important factors highlighted in the study point out that technology adoption and strategic sourcing can ensures forward-thinking, identification of opportunities with suppliers, detailed implementation plans and generation of incentives.

Procurement as a strategy -

Follow the procurement leaders -

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