3 Ways to Measure Predictive Procurement Success Beyond Cost Savings
There was a time when a company’s procurement function was largely left out of the loop and taken for granted. Once other business units had made the meaningful decisions, then it was up to the sourcing team to look after the mundane tasks of contacting suppliers and signing contracts.
A 2019 Harvard Business Review report sums up the historical approach:
“For many years, the role of the procurement department in creating competitive advantage was overlooked. Rarely was it considered a significant source of cost savings or a driver of organizational change with the ability to innovate. Seldom has the procurement function been perceived as a source of strategic insights.”
The same report goes on to explain how the adoption of advanced new sourcing platforms is transforming the role:
“Automated processes have led to significant improvements in data accuracy and security, increased compliance and transparency, and reduced operating risk. With greater analytic capabilities, procurement professionals are also gaining new perspectives on their supply chain and are increasingly taking on a more strategic and advisory role in support of overall business objectives.”
New Procurement Best Practices
The sourcing team’s evolution to being a strategic part of the business and a critical strategic function is a good thing, and more than a procurement trend.
However, it does raise some questions. Under the old model, several obvious metrics could be used to measure success. A clear one was price. Were suppliers signed at the price that the company’s business units required? When the company had to cut costs and the sourcing team was told to negotiate lower fees with suppliers, did they deliver?
How is that success measured now, given the much more strategic and dynamic role of this team?
Here are three ways to measure predictive procurement success beyond cost savings.
Boosting Collaboration in Strategic Sourcing
Companies in which business units operate in silos, without access to information outside of their functional unit, seldom succeed. Companies that foster collaboration are positioning themselves to be industry leaders. This is because decisions made in a vacuum are often flawed. When internal teams collaborate, the bad ideas tend to shake out before they’re implemented. The interaction between teams will often produce innovative solutions that wouldn’t have seen the light of day otherwise.
The sourcing department can be a crucial conduit to collaboration within a company. With an open platform, stakeholders can chime in with comments or requests related to suppliers. They can also see why suppliers were chosen and use this information for future planning.
A company with a more collaborative environment also enjoys greater operational efficiency. When you know what everyone else is doing, tasks are less likely to get duplicated, and the right multi-department resources are assigned to work together on projects.
Strategic Business Partnering for More Predictive Sourcing
Throughout the business world, there are many examples where a company and a supplier entered into a strategic partnership, resulting in a massive success for both parties. For instance, Apple became a dominant player in the smartphone industry in no small part because of its relationship with Foxconn—the company it partnered with to manufacture the bulk of its iPhones.
The sourcing department is a critical element in buyer/supplier relationships. In its new, strategic role, the sourcing department becomes a key driver of strategic business partnering. Sourcing professionals who move beyond a sole focus on price can help establish those strategic business partnerships that pay off in the long term.
Retaining the Company’s Top Procurement Talent
Retaining top talent is vital for every company, regardless of industry. That’s usually thought of as a human resources issue. However, the sourcing team can play a significant role in talent retention. All elements of being an employee are traditionally handled by a series of different departments: HR for benefits, IT for their laptop, their department manager for their desk, etc. Each of these departments is working within budget constraints. Their expertise is on the requirements for each of these elements, not negotiating prices and terms.
The supply team can work with these departments, then use its network of suppliers to deliver options that are even better while staying within the budget. Having superior benefits, a better laptop, and a much more comfortable desk go a long way toward retaining talent. The value added by the supply team can be extended to virtually any situation where the company is making a transaction that involves employees, including business travel, temporary staffing, and cafeteria operation.
“Without an advanced sourcing platform, measuring success is going to be an exercise in frustration because the unit will lack the tools needed to succeed as a strategic function.”
Circling back to that Harvard Business Review report, automated processes, greater analytic capabilities, data accuracy, and transparency are needed to support this new strategic role of the sourcing team. Without an advanced sourcing platform, measuring success is going to be an exercise in frustration because the unit will lack the tools needed to succeed as a strategic function. These goals simply aren’t effectively achievable using traditional methods.
If your sourcing department is in this position—moving toward a more strategic role in the company, but lacking the modern tools to succeed—then it’s time to consider Arkestro.
Arkestro’s Predictive Procurement Orchestration platform provides everything needed to boost collaboration, support strategic business partnering, and help in retaining top talent. It reduces cycle time and the tedious aspects of supply management. And yes, it will also help to effectively manage suppliers and strategic sourcing negotiations.
Arkestro is made by procurement professionals for procurement professionals to achieve success beyond price.
You can count on Arkestro to optimize your sourcing pipeline. To find out how your organization can get better quotes faster, schedule a demo today.