Three New Year’s Resolutions for Procurement

Spend Matters welcomes a guest post from Mickey North Rizza, VP of Strategic Services at BravoSolution.

2014 is well under way, and that means it’s time to establish new procurement goals. Here are three areas to consider focusing on this year.

1. Break down the organizational barriers and make cost savings a company-wide goal.

Reducing operational costs is not a new goal. In fact, according to a recent ISM survey of more than 500 procurement executives, cost cutting remains procurement’s number one priority. Yet despite the year-after-year focus on savings, most companies still fail to meet their goals. Of the executives surveyed, 60 percent expected to deliver overall savings of 10 percent or less in 2013.

So what gives? Typically, we see that the biggest barriers are organizational silos and a lack of overall alignment regarding procurement’s agenda. And the results – poor spend under management, weak contract compliance, and missed opportunities for aggregation and product innovation, to name a few – aren’t pretty.

If savings is your top goal for 2014, then this year needs to be all about alignment.

2. Think like the CFO.

Savings are great, but they’re not the only thing that matters. More valuable for 2014 are increasing revenue and profits and improving operational margins.

The opportunity to align procurement’s deliverables with the financial goals of the organization is massive and mostly untapped. According to the ISM survey, only 30 percent of procurement executives are actively striving to affect the financial health of their organizations.

We’re betting that thinking like a CFO – and uncovering how and where procurement can affect both the top and bottom line – will be the number one differentiator between the industry’s leaders and laggards in 2014.

3. Drop the one-size-fits-all approach.

So many organizations missed their savings targets in 2013 because they were clinging to one-size-fits-all sourcing. Case in point: Only 19 percent of procurement executives ranked supplier collaboration and innovation as a top priority.

And as every savvy sourcing executive knows, not all categories are created equally. This is especially true when it comes to strategic or complex categories – which, while different for every company – generally have two things in common: organizations can't succeed without them, or afford to overpay for them.

The key is enabling top suppliers to submit creative bids and empowering them to come up with new approaches to meeting your needs. By letting go of the strict tender requirements that have been used for years, you will likely be surprised about how many different options your suppliers propose – most of which you probably hadn’t ever thought of. And because of the tremendous scale typically associated with strategic categories, minor tweaks and changes can have a massive effect on savings, profitability, and efficiency.

What else are you committing to for 2014?

You can see the complete results of the ISM survey here.

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