Most companies understand that lowering their cost of goods provides the greatest benefit to their bottom line
Most companies understand that lowering their cost of goods provides the greatest benefit to their bottom line, but they face significant challenges in trying to do so. So, why do some companies succeed while others continue to implement program after program with no measurable benefit.
A primary reason is the recognition that effective e-procurement initiatives like any successful program requires strong support from executive management. This is more important in Retail, because as an industry Retail lags well behind other industries in utilization rates of e-procurement tools. So at a minimum in order to get off on the right foot, this typically means the CEO, COO, CFO, CLO or CPO sponsorship is critical. Once an official directive has been issued, the next step is to identify savings targets across all corporate spend categories. This sounds like a simple task. Ask someone in procurement what their top five spend categories are, what contracts are expiring and what auto renewal clauses are in place. You might be surprised at the lack of answers. Working with solution providers can help to rapidly identify these targets and rank them. Your solution provider can also offer a category specific attack plan that best maximizes savings opportunities. Having historical data is critical to these steps being successful. It is important to note, that savings alone do not create a successful e-procurement plan. What can not be sacrificed in the name of cost reduction is quality, which can include safety as well as Corporate Social Responsibility (CSR) goals including environmental support programs.
A key challenge for any procurement organization directed to implement e-procurement tools across all of their unique spend categories, is to not over complicate the process into something that can’t be maintained. At a high level, the following steps will insure that you are headed down a successful path.
Identify all spend opportunities in the next 180 days
Review all contracts due to expire in that timeframe
Assemble a list of primary and secondary suppliers for each category
Develop a total company strategy
Source at least 5 new qualified suppliers
Evaluate suppliers versus your companies CSR initiatives
Document product specifications
Provide clear terms
Award business within 30 days of event completion
Complete Contract with 60 days
Most quality e-procurement organizations have well developed plans that will aid you in implementing your best practices while maintaining quality and supporting your CSR initiatives.
As always, we appreciate and look forward to your comments.