Today’s procurement processes are much more complex than they were even 10 years ago. However, sourcing strategy has not evolved enough to keep up with the changes in technology, business needs and other factors that now drive it. The result? Procurement departments are often unable to deliver high-quality results to the businesses they serve. Here are seven ideas for improving your sourcing strategy so you can streamline legacy processes and increase your organization’s overall performance.
1) Customer Validation
Validate your product by speaking with customers and non-customers who could buy or use your product. This is usually referred to as outbound sales and there are a few good reasons for it. First, you can speak directly with potential clients and ask them what they need and what would make them want to pay you for it. It’s important that you’re not doing any self-promotion; rather, focus on helping solve their problems or addressing their pain points.
2) Identify Value Creation Activities
Gather insights into your sourcing strategy’s performance by identifying value creation activities. A good place to start is with a net present value (NPV) analysis. NPV is a way of determining how much money you can expect to gain or lose on an investment, taking inflation and other factors into account. It’s one of many ways for procurement companies in USA to evaluate their current sourcing strategy and compare it with others in order to find areas for improvement, so be sure to try out NPV analysis on your own.
3) Proactively Manage Opportunities
While it’s important to have a process in place that ensures you are being proactive in managing your opportunities, that doesn’t mean that it should be complex or inefficient. When setting up your process, try to remember these three P’s: Prioritize, Proactively and simply. While many large companies are built on tons of legacy processes, take time over designing your own system so you can focus on streamlining opportunity management moving forward. Don’t make it more complex than necessary—just make sure you know where each deal stands at all times. .
4) Set Up Success Metrics
Your metrics should highlight what you’re trying to accomplish. For example, if your goal is to save $1,000 per month on average sourcing costs, then your success metric will be saving $1,000 per month on average sourcing costs. Make sure these are business metrics—not cost or time. For example, if you want to reduce errors by 25% across all orders, focus on reducing errors across all orders—not just by 25%. If you want suppliers that meet a certain threshold of quality and price combined—then focus on that instead of simply ensuring that your prices don’t go up or down. When setting up success metrics for streamlining legacy processes it is also important not to get too focused on one problem area in isolation.
5) Build a Data Driven Sourcing Team
Data is key in helping your global sourcing companies make informed decisions. Understand your organization’s goals for revenue, cost savings, efficiency and productivity. If you’re starting from scratch, build a data-driven sourcing strategy; if you’re already using one, analyze its effectiveness to determine areas for improvement. Track metrics like time needed per RFQ (request for quote), lead time on vendors vs. internal teams and average purchase price—all of which can help you determine whether your current strategy needs improving or whether it’s performing as expected.
6) Develop Sustainable Processes
When considering new sourcing strategies, businesses must consider how their current processes and systems can be made more sustainable. As we strive for new ways of doing things, we should always keep in mind that there is no perfect approach—and what works today may not work in five years. At its core, business is an evolutionary process—and when it comes to sustainability, buyers are best served by thinking of their organization’s processes in much the same way. Business leaders must develop long-term sourcing strategies that are capable of adapting as circumstances change. Unfortunately, very few companies have mastered sustainability in its many forms; no matter how well they plan for it now, both in terms of product life cycle and business life cycle, many companies will face challenges in implementing sustainable practices over time.
7) Participate in Strategic Planning Sessions
First, get your executives on board. Once you’ve proven that new procurement processes are beneficial for them (e.g., they reduce costs or increase profits), get your team on board. Before any organization can implement big changes like these, they need to discuss what kinds of changes they want and how they will work in their business. Smaller, incremental change is also helpful in alleviating resistance in some departments.