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Agility better than speed for procurement

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Posted on 16/08/2013 by Wayne Brophy FCILT

Procurement teams looking to make savings for their companies need to focus on agility rather than speed, a new report has found.

According to the latest State of Strategic Sourcing Report from Ardent Partners, subtitled “speed is good, agility is better”, buying departments often find themselves seeking to make an impact on businesses by sourcing larger quantities more quickly. Indeed, the impact that high volume sourcing can have on businesses often makes a huge difference in improving the regard in which procurement is held.

However, once businesses reach a level of maturity in their sourcing capabilities, the report says that procurement departments need to rebalance their efforts towards improving the quality of their practices and outcomes. This is how they will be able to drive better value for their organisation in the future.

Ardent estimates that the tipping point for this shift is roughly when the procurement team can source between 70 and 80 per cent of its total addressable spend every year.

The report demonstrates that buyers are acutely aware of the need to keep costs at a minimum, with chief procurement offices saying that finding further savings is their single biggest business pressure during this year.

But with the right procurement procedures they may well continue to make sourcing more efficient, the research shows. The top 20 per cent of firms that can boast the largest savings and most formally-sourced spend – identified as the “best in class” – are cutting costs by 11.8 per cent a year. In comparison, the rest are achieving average savings of 3.2 per cent.

Among the factors which make the top procurement bodies more effective are clear and standardised sourcing procedures, especially when they maintain strong links with the contracting process. The ability to make the most of the available data also offers an advantage.

Still, one of the most important ways to improve efficiency in sourcing is e-procurement, the report finds. Automation is an important part of making sure procedures are streamlined, though other technological aids such as spend analysis and contract management can also be useful.

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