The increasing dynamics of the market entails changes to the way of managing the purchasing processes. Why do some companies stay leaders in optimising the purchasing process and what makes them successful? The Hackett Group has revealed the key elements of those companies’ strategies in a survey.
Leading purchasing organisations achieve 19% in savings, with 27% less employment comparing to organisations with lower efficiency. We present the key elements of the strategy focused on higher efficiency, which are applied by world-class purchasing organisations, according to the survey report.
Simplification combined with integration of activities
First, purchasing departments need to be able to perceive more than the very task of enhancing the purchasing processes. According to the report, a trusted adviser proactively supports the company, understands its challenges and market requirements, and addresses them in its operations. Problems may arise when due to the lack of competence or relevant attitude the purchasing fails to consider such factors as e.g. vision and strategy of the entire company.
Driving suppliers’ innovation
According to the report, world-class purchasing departments achieve over two times higher profits by engaging a supplier into innovative activities. Once again, this proves that partnership with suppliers is the key source of development and productivity. (See Good supplier relations earn profits)
The source of relevant information
World’s leading purchasing organisations are able to provide essential information in about 90% of cases, which is over twice as much compared to a standard result. They mastered this competency to the point that analytics, market intelligence and benchmarking are available on demand of key stakeholders. This requires complete and ongoing engagement and excellent organisation.
Organisations with formal strategy for assessing risk achieve almost 25% higher return on investment than those without such a strategy in place. This includes completing supplier risk assessment and working with finance and other stakeholders to determine the best risk management strategy.
World-class companies employ globally and search for people who have experience in different business sectors. This is where they find the source of new skills and perspectives that bring fresh thinking. They also make investments in employees’ development and pay higher salaries.
The survey’s results provide clear recommendations as to what factors are decisive for a purchasing organisation to be efficient. External and internal integration of activities, searching for innovation together with the supplier, risk management and employees’ competences – these are basic criteria for efficiency. To add to the findings, we could also mention electronic tools that optimise the purchasing process and buyers’ working time as well as employees’ willingness to change, and consequently, their openness to continuous development.