Procurement can become complicated in large organizations. In order to achieve strategic procurement, the entire organization must buy into best practices. When leaders take the time to get input from all departments, pain points and opportunities for improvement come to light. Setting up a steering committee makes it easier to align procurement goals with overall business strategy, and data collected by the strategic procurement team can lead to a more efficient procurement process for the company.
1. Put Together a Needs Analysis
Benchmark current performance and then said improvement targets you can use to flesh out the overall procurement strategy for the next year. To do this, you'll need as many data points as you can gather. Critical data points include procurement cost by function and department as well as realistic forecasts for future needs. The most important data points include any competitive advantages you have or wish to have over competitors. Additionally, finding the best suppliers and outsourcing labor-intensive, inefficient processes can reduce expenses dramatically.
2. Assess the Supplier Market
The strategic procurement team should identify cost-effective sources of components, finished goods, and services. If you have specialized needs only available through one or two regional suppliers, this impacts your ability to negotiate for telecom services and equipment. This may pinpoint a need to look outside the region or consider cloud-based alternatives that can eventually drive down procurement costs.
3. Gather Information About Your Suppliers/Potential Suppliers
Carefully evaluate your current suppliers and consider onboarding new players. Do you have needs your current suppliers cannot meet? By documenting your selection criteria, you can vet out new suppliers that may have a better product offering and pricing. Here are some of the factors to include in your decision-making process:
Business reputation, credit rating, and reputation of each supplier (financial statements, credit reports, etc.)
Contact current clients to get an idea of how satisfied they are with the supplier's services
Agents or contractors familiar with the suppliers, your competition, and the market can help you find valuable suppliers
Select multiple suppliers whenever possible to reduce your risks and give you bargaining power
4. Hone Your Sourcing Strategy
Use the information gathered in the first three steps to come up with a solid strategy for your sourcing and outsourcing. Send a Request for Proposal (RFP) to suppliers who offer advantageous pricing, superior service, or features that can help you improve your telecom and IT infrastructure. Remember that developing strategic partnerships isn't always about price negotiation. Also consider strong features that could help you expand your scope of business that current suppliers may lack.
5. Implement the New Sourcing Strategy
It can be difficult to get all your ideas down on paper and run them up and down the chain of command for approvals. However, the real proof is in how successfully you can implement your new strategies. Concentrate on securing strong partnerships and consider acquiring suppliers who provide mission-critical products or services. Characteristics of vendors and suppliers you want to keep close include the following:
Involvement in core business activities with access to confidential, proprietary knowledge
A limited number of suppliers for specific technology or equipment
Skilled labor or consultants your company depends on (Can you hire them to work directly for you?)
Services and equipment that is integral to your company's broader business strategy
You'll want to maintain good relationships with critical vendors while keeping an eye out for opportunities to expand your options with other providers.
6: Negotiate With Suppliers
The strategic procurement team can compile responses from different suppliers and create an evaluation matrix. You also need to assign subject matter experts to respond to requests for information that allow vendors to provide realistic bids. After evaluating the quotes and capabilities of each vendor, the procurement team can come up with a shortlist of suppliers to me with for contract negotiations.
7: Implement Supply Chain Improvements
Invite the winning suppliers to attend meetings and help you develop a system for measuring future performance. This should include key performance indicators critical to your business. When you bring on the suppliers, transfer information to ERP systems so that you can incorporate metrics into your overall business dashboard when needed.
This is an iterative rather than a linear process. It will take time to work out the best way to manage procurement strategy. However, following these steps will allow you to find what works best for your company and establish a culture of continual improvement.
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ABOUT THE AUTHOR: JEFF POIRIOR
Jeff brings 25 years of telecommunications and information technology management experience in voice and data networking, server support, and telephony and security; with a significant emphasis on customer service. Prior to joining Valicom, he was chief of the infrastructure support section for the Wisconsin Department of Transportation. Jeff was the vice president of operations for CC&N, overseeing telecommunications, help desk, data, and desk side support services. Prior to that, he served as the associate director of technical resources for Covance, responsible for managing systems and network operations supporting 1700 users in Wisconsin and Virginia. He has also led data center operations at Magnetek Electric, supporting mainframe systems, client/server applications, telephony systems, and computer-aided design. Jeff holds a bachelor’s degree in business administration from Cardinal Stritch University and a master’s degree in business administration from University of Phoenix. In addition, Jeff is a past board member of the Wisconsin Telecommunication Association.