What is the inspiration for seeking to improve spend management influence? What is the driving force behind trying to impact the spend management function?
- Shift the focus on promoting alignment with executive strategy towards enhancing the bottom-line
- Effectively execute and manage a pre-defined wave plan and business case for sourcing both direct and indirect spend
- Increased awareness of risk to the supply chain requires a stronger focus on spend management and financial controls
- Recent socioeconomic events have prompted the need to plan for and mitigate disruption to the business operations
Without a comprehensive strategy for how procurement will advance the spend management program, the team will have a steep hill to climb before achieving new value.
Many procurement organizations, invest most of their time and focus on managing suppliers and ensuring the lines of business are supported.
This is a good start for less mature organizations, but leaves a lot to be desired for a more mature procurement function.
As a procurement organization begins its journey, no matter how mature the business function is, it must take a deeper focus on the team.
- Category Management: Empowering the sourcing function to influence and guide the business will provide the procurement function a greater level of credibility resulting in a stronger ability to influence decision-making
- Supply Chain: Engage suppliers, at all levels, in collaborative innovation and business improvement to bring new ideas and value to the business
- Stakeholders: Collaborating with the lines of business early and often will cement the relationship and trust with procurement, and results in long-term proactive engagement
- Cross-Functional Leaders: There is often untapped value from the other business functions that influence spend management, such as Finance, Operations, and IT.
The journey is best endured with a team that is all pulling in the same direction.
Often, when procurement teams focus on spend management, they prioritize low-hanging fruit or top spend categories.
Certainly, tackling either of those will produce some results. However, in order to truly optimize spend the mature organization take a more holistic approach to this segment of the journey.
Research shows that an organization’s procurement function frequently lacks the type of high-quality, sourcing-ready data. Without it, it is impossible to identify and realize cost savings. The first step is to do a deep data cleanse and spend analysis.
Add the following to strengthen your spend management strategy:
- A formal business case, sponsored by key stakeholders, to supplement the detailed opportunity assessment
- Directional strategy for long-term compliance management and supplier development
- Formalized key performance measures to monitor success and ensure accountability
An effective spend management plan includes a deep focus on the data, the opportunities and the plan. When combined with the right team and effective navigation, a successful journey will result.
- Formalize and deploy a comprehensive sourcing methodology to allow the sourcing teams to effectively execute any sourcing project
- Employ market intelligence as it relates to supply chain markets, categories and commodities to ensure your sourcing strategy is right for the current economic environment
- Align spend management objectives with senior management, specifically sourcing strategies, to ensure buy-in and organizational support
- For true value capture and sustainable contract performance, go beyond unit price savings and consider the total cost of ownership
- Apply leading change management strategies and communication to prepare the organization for changes in supply and supplier relationships
- Engage operational planning and management tools to enable new contracting strategies which ensures savings compliance