Archive for February, 2014

Procurement Operating Model

In recent years, with Procurement emerging as one of the most strategic pieces in the corporate jigsaw, companies are increasingly concerned about structuring their Procurement teams for maximum impact.

There are 3 main facets to an Operating Model – Strategy, People and Execution Methodology.

 

A vital piece of the jigsaw

The Strategy governs how an organization’s Procurement activity is conducted. This may differ from company to company and is typically in synergy with the parent Organization’s mission. For example, a manufacturing company that operates on a just-in-time basis places a higher emphasis on lead time. A pharmaceutical company that makes drugs with very little differentiation from its competitors would consider cost as very important. Compliance and governance issues have to be carefully considered while drawing up product specifications or developing supplier selection criteria. Specific metrics and performance indicators would have to be identified to analyse the performance of the in-house teams and provide feedback.

People form the backbone of any organization, and it is no different in the world of Procurement. With time, the role of a Procurement professional has greatly expanded and he/she is now required to wear many hats. It is virtually impossible for a Procurement professional to research the market, identify suppliers, conduct sourcing events, sign contracts, issue PO’s, co-ordinate deliveries and manage suppliers all by themselves. Best-in class organizations have understood this constraint and have mitigated it by setting up twin teams whose tasks and objectives differ. A Strategic Procurement team that is tasked with developing and maintaining the supply base and a Tactical Purchasing team that is responsible for execution. The typical responsibilities of a Procurement employee would include Spend Analysis, Category Management, Strategic Sourcing, NPD, Risk Management and Supplier Relationship Management. On the other hand, a Purchasing employee would concern himself/herself with Scheduling, Issuing PO’s, managing deliveries and expediting.

Methodology refers to the processes and tools that the organization adopts to support their Procurement teams. Cloud based tools for spend analytics, conducting sourcing events and reverse auctions, vendor management have proved to be very popular. In addition, it is vital for organizations to adopt a formal process that defines workflows and hand-offs within their team. This greatly reduces the chances of redundancy and exponentially improves efficiency.

At BCube, we understand that various companies exist along the wide spectrum of Procurement Model adoption. Our process frameworks, tools and people are designed to take you to the next level – wherever you may be. Learn more about our Solutions

Posted in: Performance Management, Process Control, Procurement, Strategy, Supplier Management

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