Many themes emerged at this week’s ProcureCon conference in St. Louis. All were compelling, but some resonated with attendees for their ability to highlight the most important aspect of operations: developing and maintaining reliable, productive supply chains that help companies achieve their strategic visions for growth and revenue.
I will expand on these themes and other topics from the conference in future postings, but want to share some that every procurement organization should be thinking about. Developing creative and viable approaches to the following areas will substantially extend the capabilities and effectiveness of procurement operations.
1) Contract negotiations. New ideas are emerging about how contracts should be written. These ideas promote collaborative discussions between parties and downplay negative incentives that favor one side. In procurement especially, both the buyer and supplier must understand the nature of the commitment to each other. A contract that clearly favors one side over the other could affect performance and results and end up costing the customer revenue.
2) Qualifying suppliers. How well do suppliers meet commitments for product, delivery, quality, and other needs? How capable are they in new technology, process innovation, productivity, cost containment, and other key areas? Should your suppliers be considered for new contracts based on their performance? Many customers cannot answer these questions because they have no way of qualifying their supply chains. Developing rigorous standards and scoring each supplier on performance is one way to weed out companies that have no place in your future.
3) Qualifying your personnel. How well does your company live up to its supply-chain commitments? To be more to the point: How well do your personnel perform when it comes to issues, performance, relations, and other duties vital to supply chain efficiency? When developing standards and grading suppliers, do the same for your procurement organization.
4) Cost management. What is your organization’s largest monthly expense, apart from salaries and benefits? It’s probably an investment that your personnel needs but which managers are probably not paying much attention to: mobile communications. This summer, ask your intern to check every monthly expense report or bill that includes mobile communications. The amount of money your (presumably) cash-strapped organization is paying here is likely huge. But there is something you can do about it, which I will discuss in an upcoming post.
5) Supplier reviews. Periodic reviews can be developed into vital face time that gives procurement managers, their staffs, and senior company executives an opportunity to meet the people who help achieve your firm’s growth and revenue targets. It is also a way of getting everyone on board with your company’s strategic vision and learning where opportunities and pitfalls lie. If your company doesn’t do supplier reviews, it should. If it does, you should be thinking about how to optimize the process for quality feedback.