The
Procurement function of an organization is gaining importance for companies
across industries.
Top
management expects procurement to become a main contributor to business
stability, cost reductions and to profit increases. Procurement starts to plays
a major role in financial enterprise risk management and is at the forefront of
dealing with globalization issues.
Detecon, a consultany part of Deutsche Telekom, has
been advising its clients on numerous Procurement challenges and has developed
helpful methodology in this space. In this blog I would like to summarize some
of Detecon’s Procurement consulting methodology and also share my own experience
working for a supplier of Deutsche Telekom (Detecon’s most dominant client).
We can
expect an extension of procurement responsibilities in the future and also act
on a global level, thus massive increase of procurement’s contribution to
business targets.
Procurement
is gaining more responsibility, steering internal and external logistics and
contributing with excellent know-how about supplier markets and products in
early stages of the product development process. Teamwork in interdisciplinary
project teams has replaced traditional administrative procurement activities.
In order to
achieve the above, procurement has to position itself as valued business
partner with the enterprise, delivering transparent benefits to the company’s
bottom line and creating value for internal customers. Procurement needs to
establish sound performance measures for both strategic and operational
procurement. It needs to identify and realize continuous improvements of
effectiveness and efficiency in procurement processes, organizational
structures and IT.
Systematic
risk management across the organization and especially across the supply chain
is necessary. Quality defects due to low cost country sourcing, fluctuating
commodity prices, volatile currency exchange rates and increasing number of
insolvencies are just a few examples.
Benchmarking
and gathering of best practices across industries helps identify opportunities
and methods to continually improve.
Procurement
must develop from cost reduction to sustainable value contribution (mainly
derived from strategic sourcing functions) and from efficiency to effectiveness
(mainly derived from operational procurement function).
It is
helpful to split tasks between operational and strategic procurement:
A split
between strategic and operational procurement task only makes sense, if the
procurement organization acts in a category-based way. However, many
telecommunication providers have not fully established such a split and also do
not plan to do so.
Detecon
offers a simple four stage model for value contribution by Procurement:
Challenges
continue to remain:
- Organization structures must become more flexible, responsive and agile to implement global sourcing strategies in increasingly dynamic supplier markets. A suitable balance of power between regional and central competencies is necessary.
- Structures and processes need to be better aligned with new procurement strategies.
- Collaboration models and strategies are necessary to deal with the new ecosystem paradigm.
- Establish interdisciplinary teams across product and service life cycles.
Start is
often to develop a suitable procurement strategy as Detecon proposes in some of
their procurement documentation.
A holistic Procurement
model can help achieve sustainable performance (Detecon): 
Driving
improvements and transformation through the value & supply chains of
multi-national companies for over 15 years, I reckon the importance of having sound strategy, processes and methodology and aligning those with the overall
organization.
As supply
chain consultant I have had the opportunity to audit and evaluate suppliers of
a key multi-national companies in China and Europe and I am still amazed of how
world class companies fail in fundamental procurement and supply chain
management tasks.
Often I
witness a lack of vision. There is so much potential to turn supply chain
management (and procurement as a subset) into a competitive advantage. In today’s
age it is not so much anymore about what a company can make and produce itself,
but how it can identify, select and orchestrate the different inputs from other
players in the industry and provide superior value to its clients.
This is an
exciting topic and I look forward to communicate more on this later.
+++To share your own thoughts or other best practices about this topic, please email me directly to alexwsteinberg (@) gmail.com.
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