Procurement Can Make a Bigger Business Impact in

4 Ways

Set a new cost savings standard. Cost cutting is still the #1 priority, according to a new ISM survey of 545 procurement executives. However, realized savings are marginal at best. The majority of procurement teams will only deliver 10% in savings across all categories.

Understand what ‘cost-cutting’ really means to your stakeholders: fewer resources. Overcome this resistance by explaining how companywide savings can be reinvested to fuel marketing, R&D and revenue-generating projects.

Crystallize procurement’s value as it relates to each department’s or business unit’s challenges, priorities and goals to improve stakeholder buy-in and contract compliance by ensuring that procurement is delivering the right contracts and suppliers.

Build the business case that outlines the true impact that sBuild the business case that outlines the true impact that savings has on the bottom line and overall financial performance.

Drive revenue & profit margin growth.Savings alone aren’t enough. However, only 30% of procurement executives are striving to transform and impact what business leaders care most about: revenue and profit growth.

Create a transformation plan. Start by asking stakeholders what procurement can do better.

Speak finance’s language by going beyond savings to understanding broader business issues.

Start measuring the impact on margins, earnings- per-share, return on assets on invested capital.

2

Tackle complex categories once and for all.Only 25% of procurement executives measure the performance of specific sourcing processes. How do you know what’s working and what isn’t? Companies that use advanced sourcing techniques in complex categories improve operating margins by 350 basis points and return on invested capital by 380 basis points. That's hundreds of millions of dollars in potential profits.

Execute larger-scale sourcing events and reduce the time and man power required from procurement.

Replicate face-to-face supplier negotiations to allow suppliers to innovate on your behalf.

Optimize the evaluation process by running ‘what-if’ scenarios to understand all possible implications, for every stakeholder involved.

3

Uncover the best-kept innovation secret. With the right processes and technology in place, supplier innovation and collaboration can be a tremendous by-product for procurement. That starts with rethinking how you interact with suppliers before you sign on the dotted line.

Re-engineer the sourcing process to allow suppliers to submit more creative proposals, rather than answering strictly defined RFPs.

Meet with your strategic partners quarterly to understand their capacity, R&D initiatives, partnerships and more.

Track innovation as a key indicator of supplier performance.

4

Driving a bigger financial impact

Five Financial Metrics Procurement Should Impact

What’s your biggest challenge in 2014

Finding new ways to source complex categories

The Category Sourcing Scorecard

Rolling out new procurement technology

The Gartner Magic Quadrant for Strategic Application Suites