Most companies aligned with the supply chain review their procurement strategies to address various challenges. Generally, eight out of ten such companies do it in the hour of need. Instead, visualizing the challenges and strategizing the ways to deal with them is the best approach for a firm. In line with it, you can easily deal with procurement-related challenges by implementing a well-planned strategy in advance.
At present, most experts view strategic procurement and competitive advantage as the two sides of a coin. They do so for a good reason, though. Both aspects share a cause-and-effect relationship. With the entry of new players that compete with each other to provide the best value on goods or services, the rules of procurement have changed over the last few years. As a result, procurement companies face more competition now than in the past. Strategic procurement is the only way for them to gain a clear advantage in the current competitive business environment. It links companies with a reliable and diverse range of suppliers, thereby proving to be a game-changer for them.
Whether or not your company can involve reliable suppliers with its mission statement will depend on how it handles its procurement process. Supply chain agility and an improved tangible cost are the two benefits of strategic procurement. Both these factors work together to offer a competitive advantage to a procurement firm.
Ways in which strategic procurement can give your firm a strategic edge
When you have a well-defined procurement process in place, you can benefit from it in many ways. At first, it reduces the costs of supplies which allows your firm to get a clear advantage over its competitors.
With reduced procurement costs, your company can add more value to the supply chain. Plus, your firm can do more with reduced procurement costs. Due to the latter, your company can show more resiliency in the supply chain, and mitigate different risks linked to suppliers. Also, it can bring about a fresh wave of innovation to your products and improve the quality of both goods and services of your firm.
But to reap the aforementioned benefits, you need to keep an eye on different procurement processes. You need to review them from time to time to ensure that they are in line with your company’s needs. More importantly, you need to make sure that they provide a competitive advantage to your business.
Here are some ways in which strategic sourcing process can offer a strategic edge to your procurement firm.
- Enhanced value to the value chain based on the reduced cost of supplies
Providing a higher value is a major objective of procurement firms. To achieve this objective, such firms look for ways to acquire supplies at a lower cost. Your firm can benefit by adopting this strategy. In addition, you can start implementing the best and most effective procurement practices.
For instance, you can make use of the benefits of discounts and warranties. Most procurement companies miss out on taking an advantage of it. On your part, you wouldn’t want to miss out on the lucrative warranties and discounts related to supplies.
Unfortunately, some procurement firms fail to track their expenditure. As a result, they fail to control costs. In most cases, dark purchasing practices of procurement firms turn out the be the reason for it. You can keep such practices at bay by monitoring the purchasing activity of your procurement firm.
In the long run, it will not only help you minimize your procurement costs but also inspire you to foster a strong business relationship with stakeholders and suppliers based on desired purchase patterns. The more you track the latter, the more gains you can make with your finances. If you exercise control over costs, you can achieve a competitive edge in terms of finances.
- Easy segregation of high-performing suppliers based on efficiency
When a procurement firm has multiple suppliers, it needs to narrow down the list of its suppliers based on their performance. This is one of the benefits of strategic procurement. A big positive of doing it is that it places your procurement firm in competitive positioning.
Strategic procurement places your procurement firm in a position from which it can identify high-performing suppliers. By increasing your collaboration with such suppliers, coupled with the elimination of the existing redundancies of your firm, you can ensure high-quality sourcing.
In addition, you can also get an insight into the competitiveness of your suppliers. The more you identify the underperforming suppliers and weed them out of your system, the more competitive advantage your firm will get in the long run.
- Improved innovation
Though cost savings is a major concern for procurement professionals, they are also expected to take care of other things. These include managing the business relationship with suppliers, managing supplier risk, and meeting social responsibility targets. In addition, procurement professionals have the added responsibility of ensuring innovation for their firms these days.
You can make the most out of strategic procurement by including it in the product development phase. This move will ensure maximum innovation for a product in the design phase. Plus, you can place the right price tag on your product. Strategic procurement introduces a wide range of tools to help procurement firms and their professionals embrace innovation.
- Supplier risk mitigation
Procurement firms have their share of vulnerabilities. The lack of early preparation for dealing with them can prove to be costly for such firms. Strategic procurement can make a big difference in this regard by allowing a firm to identify, analyze, and resolve various issues that its suppliers face.
Strategic procurement offers total coverage of risks across vital areas. These include strategy formulation, operations, finance, and compliance.
In terms of risk mitigation, strategic procurement plays both a key and well-defined role. It draws insights from the past and present to mitigate the current risks as well as the possible risks that suppliers may face in the future.
- Higher resiliency of supply chain support
Many potential hurdles can appear abruptly and disrupt the supply chain. They range from natural disasters to labor fluctuations and economic uncertainty. The outbreak of the covid pandemic highlighted the importance of strategic procurement in 2020 when procurement departments had two primary challenges. Alongside managing the roadblocks in cash flow and supply, procurement departments had the challenge of serving their stakeholders by bypassing the interruptions.
Initially, addressing these challenges in the post-pandemic phase seemed next to impossible. Most procurement firms had this feeling, especially in 2020. Such firms could show a high resiliency in the supply chain due to their flexible procurement strategy.
In general, strategic procurement helps a procurement firm identify the possible risks beforehand. As a result, it can formulate a plan and implement it in time instead of doing it in the eleventh hour.
The concept of strategic procurement revolves around the objective of offering a competitive edge to procurement firms. When embraced, it leads a procurement firm in the direction of gaining a competitive edge in different ways. Invest your time and resources in formulating the best strategic procurement plan in place to reap the benefits of deploying it.