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Adopting the best practices in procurement that are used by world-class organizations can be beneficial to your business for various reasons. It can lead to valuable relationships with suppliers, which means you can gain better supply chain resilience and have effective contingency plans in place.
Also, adopting procurement best practices leads to better and more objective decision-making, enabling your company to compete at a higher level. World-class organizations know how important it is to make procurement a key element of their strategic planning, as it enables them to build strong relationships with suppliers, create resilient supply networks, and ultimately, become more profitable.
By adopting the best practices that the world’s top organizations utilize, your business can achieve greater efficiency and more financial success.
Why Are Procurement Best Practices Used by World-Class Organizations?
The Hackett Group, which is a world-renowned management consulting organization, recently published a report that shows how the best global procurement organizations operate much more efficiently than other businesses.
The report found that those organizations have operating costs that are 18% lower on average than other companies, while also having 28% fewer employees on average. Furthermore, those world-class organizations managed twice the ROI compared to other companies.
Those statistics alone should make you sit up and take notice of how important utilizing procurement best practices is for your own business. Now, let us take a look at five of the most important procurement practices that those world-class organizations have adopted so that you can potentially do the same.
#1. Focusing on Value-adding Activities
One of the key strategies identified by Hackett Group’s research that is used by world-class organizations to achieve superior procurement results is reallocating resources from transactional focus to activities that add value, such as analytics, performance management, and purchasing strategies.
Leading global organizations know that they will falter if they devote too much attention and time to transactional work and not enough attention and time to strategic activities. So, you should follow suit for your own business.
#2. Digital Transformation
World-class organizations are focused on digital transformation. They create procurement technology strategies, partner with the best IT professionals, and create technology roadmaps that define desired strategic outcomes and KPIs.
The procurement best practices of large global companies that utilize digital transformation also include knowing how important it is to invest in procurement tools for organizing contracts and purchase orders.
#3. Using Analytics to Make Better Decisions
One of the most important procurement best practices concerns making decisions based on analytics.
The Hackett Group report found that world-class procurement organizations spend, on average, 23% more on technology per FTE than other companies.
So, it is more than worth investing in systems and tools that enable you to analyze data that can help you solve complex business needs.
#4. Investing in Talent Development
Successful world-class organizations know how important it is to invest in talent development. By training and nurturing their staff members, these companies increase the business acumen of their procurement staff and ensure that they maintain low staff turnover.
#5. Being Customer-centric
Companies can and should spend time on analyses, building relationships with suppliers, and enhancing staff members’ skills, but world-class organizations also know how important it is to remember the customer.
Your customers should be the focal point of all of your procurement activities, just as they are for world-class companies. You should always look at things from a customer perspective if you want your procurement processes and policies to match world-class organizations.
And speaking of customers, you might be interested in this guide about how to encourage return customers.