Strategic sourcing leaders gain and maintain their continued value creation and competitive advantage through three key success factors:
Excellent category management
Category superiority management is the most powerful cost reduction level, which can contribute about 70% of the purchase value. Not only that, excellent category management can also provide deep supply market insights to help shape the business strategy of the enterprise.
Almost every CPO knows how to negotiate and conduct competitive bidding, but procurement management leaders will be more inclined to apply specific procurement strategies and tool combinations based on the comparison of the supply and demand game power of specific categories to achieve value creation.
Based on the four quadrants of the supply game power, the strategies used in the quadrants “Management Expenditure” and “Using Competition” [eg: purchase volume bundling, supplier integration, demand reduction, international procurement, bidding and target pricing] are the majority of procurement Strategy familiar to managers. This is not surprising, because typical companies often use these methods.
However, procurement management leading companies are twice as likely to use these procurement strategies systematically and are more likely to have a higher impact.
However, there are more challenging parts. Suppliers have strong game power, potentially limited procurement leverage and game power. Therefore, changing the nature of demand strategy can effectively reduce the supply game power and reduce dependence on suppliers.
Commonly used strategies are procurement strategies such as functional assessment, product complexity reduction, and procurement-based design. Most companies do not use these strategies because they are either unaware of these strategies or because the capabilities and skills of the procurement function have been extended. Inadequate coordination of functional departments.
However, procurement management leading companies will use this strategy more systematically to exert more influence. All companies in this area have the opportunity to improve the corresponding performance by improving the effectiveness of the department team.
For strategic materials, both the supply and demand sides have the same high gaming power. This scenario requires both parties to adopt a strategy of strategic cooperation, and both parties to the cooperation can benefit from it.
Provide category management excellence when the supplier's gaming power is high
Excellent purchasing team [internal effectiveness]
An excellent procurement team is a catalyst for effectively making supply management a synergy and shaping the company's strategic development goals. It can also achieve sustainable development of the company through process design and execution, technology investment, human resource development and performance management.
Strategic procurement management is a strategic business partner of a leading enterprise. More than 90% of procurement leaders report to the executive level of the enterprise. They are more actively involved in the company's high-level business operations and decision-making. , Value chain restructuring, mergers and acquisitions, etc. have higher influence. They are more actively involved and influence the functional spending area.
Procurement management leaders actively change their supply management operating model and organizational structure, focusing more on strategic value creation activities. They are more inclined to focus more than 70% of procurement resources on strategic procurement categories. Standardization. Balance automation and optimization strategy activities.
In order to attract and retain high-quality strategic talents, procurement management leaders will provide entrepreneurial opportunities to invest in skills development for purchasing professional knowledge. The ultimate goal is to build a strategic procurement organization brand and influence within the enterprise.
Procurement management leaders will create a "high-performance" scenario or environment for the procurement team, with a strong performance management system that can create value and improve capabilities.
Excellent supplier base [external effectiveness]
Supplier excellence can ensure that the supplier meets the contract delivery requirements, and more importantly, by quickly obtaining large and influential innovation activities from the supply market, companies can effectively reduce supply risks and obtain competitive advantages.
Leading procurement management companies will proactively monetize the supplier's life cycle. When most companies are still sourcing Sourcing, evaluating, selecting, and contract negotiations with suppliers, leading procurement management companies are more inclined to concentrate To proactively manage the supplier footprint, to more efficiently select and award to those suppliers who can support the business development strategy.
