To people unfamiliar, job descriptions for roles in the procurement department, like managing a supply chain for example, may sound very straightforward or even dry. While working in procurement does have its tedious aspects, it involves both reacting to immediate problems and planning for situations years in the future.
A procurement professional’s planning skills offer a lot more value to the overall strategic direction of a company than what it may seem like on the surface.
When a procurement professional is evaluating a new supplier or service, the person shouldn’t be asking what can this supplier do to serve my immediate needs today, but rather, how can my relationship with this supplier contribute to the company’s performance, and its position in their respective market.
Here are three situations where the procurement department can contribute to achieving the overall goals of the company.
Cut costs
If the company has placed a priority on cutting costs, procurement can help by utilizing this mindset in inventory management. Often, it seems like the best path to saving money is to order the least costly inventory for the company’s needs.
To get the best price, however, suppliers often require a minimum buy, which can effectively cancel out the cost savings from the low purchase price. If a company buys more than it needs and can’t move the inventory, it then has to account for storage, finance cost or disposal costs.
The procurement department can help manage inventory costs by utilizing effective spend management techniques and evaluating the best “lowest mutual cost” instead of just evaluating on upfront price alone. Obtaining the right amount of inventory and preventing costly leftovers is a great way to help cut costs.
To increase visibility and accountability across the supply chain, using a system with cloud-based software can more easily keep track of invoices, receipts, and accounts billable and receivable as well as streamline payments efficiently.
Effecting these changes can benefit a department’s work flow and can be used as case study for exemplary internal procedures that can be mirrored by the entire company. Given that human error accounts for 52 percent of the root causes of security breaches, according to a study from CompTIA, relying on uniform best practices grounded in consistent reliable programs is key.
Expanding internationally
If an enterprise is seeking to expand internationally, procurement can help by seeking and establishing relationships with global supplier networks.
Even if there are no international suppliers available for the particular product or situation, asking for referrals and making introductions through existing domestic suppliers to ones with ties overseas is an easy way to expand the company’s international network.
International growth is a popular pursuit in corporate finance departments. A survey of senior finance executives called Shaping the Finance Function of Tomorrow found that 75 percent of its respondents seeking growth said they will expand into foreign markets.
Procurement departments can minimize international expansion risks that include increased costs, delays and inconsistency that can occur with using multiple points of contact by utilizing cloud-based software to stay organized and maintain quality control.
Increase market share
Procurement can support a company’s strategic goal of increasing market share in a particular vertical or geographic area by concentrating its efforts on increasing the company’s footprint in the specific space.
By strengthening supplier relationships, procurement can help the company deepen its ties to specific key markets. Procurement can also help identify synergies with supplier partners in existing markets to make it easier for the company to expand into offering new products or services for its existing customer base.
Procurement professionals should be thinking about how their relationships with suppliers can contribute to the overall growth of the company, instead of just considering how a supplier can serve their needs today. This shift in mentality can be the difference between being viewed as a key strategic partner within the organization rather than just another department.
David Nitzsche is senior vice president of supply management of AmeriQuest, and assists in providing increased value to clients through competitive procurement programs and service. He is responsible for carrying out out AmeriQuest’s mission of providing participants the best purchasing and supply management capabilities available in the truck transportation industry. Prior to joining AmeriQuest in 2006, David served as Group Director of Supply Management at Ryder System Inc. He is based out of Naples, Florida.
