5 ways to ensure procurement stays relevant
Are you struggling to extract further savings through the application of spending consolidation and market testing? Are most of your spend categories now mature and behave predictably?
Read on for five ways to ensure your mature department remains relevant to your organisation.
1. Drive efficiencies in the procure to pay system
Procurement should be responsible for the core operating platform, or ‘procure to pay system’. The system should:
- drive productivity
- focus on increasing the use of e-procurement
- provide help-desk services to business units and suppliers
- provide management information on consumption, performance and costs of services and products
- achieve efficiency through consolidation of processes across procurement
2. Adopt an integrated approach to contract management
Procurement should drive an integrated approach to strategic contract management, resisting business unit-specific solutions and driving enterprise-wide solutions. The objective is to:
- standardise processes in a manner that improves consistency and reliability of services
- extract incremental pricing benefits
- reduce operational, regulatory, financial and reputational risks
3. Become the independent third party in contract audits
An independent contract auditor encourages the business unit and the service provider to collaborate to achieve the best possible audit outcome. Eliminating the conflict of interest of the business to review its own contract allows for dispassionate conclusions to be drawn, including about where the contract performance and compliance can be improved.
4. Be the knowledge bank for service provider management
“How do I manage my service provider with a static contract in my highly dynamic environment?” asks the business unit. Procurement needs to take control of the continuous improvement agenda.
This requires Procurement to understand which contract management approaches can be generic to fit all contracts and which need service-specific solutions. These specific solutions will incorporate strategies to trap specific service knowledge as it applies to the client. Each contract should be an incubator of ideas, for which all parties are rewarded.
5. Standardise procurement to deliver better governance
Organisations will never get on top of their contract management obligations unless they increasingly standardise their contracts. Procurement must deliver and manage the standardisation of contracts and contract structures (where appropriate) to deliver greater governance.
No longer is the threat of re-procurement credible as it won’t deliver further cost reductions. With the resources and competencies in place to allow the interpretation of data, leveraging of knowledge and driving to standardisation, sourcing departments can continuously deliver cost reductions, service benefits and risk mitigation.