In this Video, Jonathan Zhang provides some insights into Procurement Strategy. Reviewing your procurement strategy can be an essential part of improving Supply Chain cost and service performance.
“Hi, I’m Jonathan Zhang. For those procurement or Supply Chain executives in suitable organizations, there is an increasing number of uncertainties to manage, especially in today’s tough economic environment. Yes, we are living in a world of a severe market competition, shorter product life cycle, tougher customer demand, higher cost reduction pressure, longer supply chains, and heavier reliance on outsourcing. Procurement professionals are required to be highly creative and innovative to resolve the business issues across a broader management disciplines. Is there any definitive boundaries for procurement not to step across? If you think so, you are probably too conservative. Now I would like to share with you some trans and developments in a strategic development that I’m seeing.
First Point: Procurement is an integral part of the total supply chain.
The boundary between supply management and a demand management are getting more and more blurred these days. The time when procurement was spoon fed with a demand forecast has long gone. For example, today’s buyers are getting more and more proactive in contributing to demand planning process and to reduce potential cost and loss. It is imperative for us to risk procurements profile within a total supply chain and the whole organization. It sometimes requires us to overcome culture resistance and a break down functional barriers.
Second Point: There’s a no perfect procurement model or perfect procurement organizational structure.
Globe operation as a result of a globe competition requires a procurement to think globally and act globally. An efficient procurement function should be the one with a cross functional view and across locational presence. The question is how can we use robots to process the system to support the structure you choose? Let’s not underestimate the culture diversity, the language barrier and a skill imbalance that may exist in any global procurement organization.
Third Point: Relationship management is the key to effective procurement function.
Procurement should focus on a long term supply sustainability rather than just a short term cost saving. To nurture your supply base into a fully committed and a fully supportive external entity requires a lot of time and effort and it means a lot to the success of your own business. Equally important, having a holly collaborative working relationship with your own R&D, sales, marketing and operations will help company focus on long term positive outcomes. Through the years, how have we distorted the aim for strategic alliance and a cost transparency? And how much confidence do we have to give back to our supplier after constantly asking for cost reduction for our own short term benefit?
Fourth Point: Cross functionality and versatility are two characteristics of today’s procurement function.
Procurement is a cross functional talent that manages the multi-faceted supply issues. For a designer engineer to join a procurement project team, shouldn’t be a surprise to us anymore. Today, procurement’s contribution is not only measured on its direct control over the bottom-line target but also measured on its input to the top line achievement.
Fifth Point: It is time for us to revisit the role of key performance metrics.
Having a dozen metrics is probably just as good as having 50 of them in a procurement area. The real value of a proper performance measurement system lies in self-realization through benchmarking. We need to be diligent but not fanatical about improving KPI’s across the board. Let’s be reminded that there are lot of other things such as corporate strategy and a market dynamics that can impact your procurement performance. When strategic and structural changes happen, we need to question the legitimacy of using some of rigid performance metrics which only work well in normal circumstances. This will help us avoid an endless debate and a short cited corrective efforts, especially in dynamic business environment.
My humble advice is be honest to yourself and don’t be afraid to be your own judge. Lastly but most importantly aligning the procurement strategy with overall business strategy is increasingly important to global players. A simple strategic alignment requires not only effort from procurement directors and managers, but also brought input from the whole procurement organization. Without a proper skill, knowledge, process, system support and a coacher, this will be hard to achieve. Logistics Bureau’s procurement experts help customers on broad range of a procurement and supply management issues including but not limited to:
Procurement Strategy Design
- Global Sourcing
- Supply Based Management
- Commodity Management
- Process Re-engineering
- Performance Measurement System
- IT system Implementation
- Procurement Sustainability
- Lean Supply Chain
Please feel free to contact us to discuss your procurement issues. Thank you! “
More information on Procurement:
Procurement Strategy Consultants