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How to Assess Strategic Procurement Maturity, Part 2

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Continued from How to Assess Your Level of Strategic Procurement Maturity, Part 1

A strategic approach to IT procurement can help cut costs and improve efficiencies. The first step to taking a strategic approach to IT procurement strategy is assessing your current procurement maturity.

Strategic Procurement Part Two

Many enterprises have gained a strategic advantage by treating their procurement as a strategic function. Map out your procurement process and make sure it encompasses these best practices.

Strong procurement processes align purchasing decisions with corporate strategy, increase bargaining power with suppliers, and increase the value obtained from investments.

The key is determining when to put procurement through a detailed process. The dollar value of the purchase is always a strong indicator of strategic relevance. For example, ordering all of office supplies from one supplier at predetermined intervals can increase purchasing leverage. More obvious examples include replacing 50 CRT monitors with LCD monitors, purchasing 30 handheld devices, investing in a storage area network, or establishing a wireless local area network. To achieve maximum value from purchases such as these, a procurement protocol must be followed.

Best Practices

Add the following best practices to your current procurement procedures to minimize maverick spending, maximize operational efficiency, achieve substantial bargaining power with suppliers, and align purchasing decisions with corporate goals and objectives.

1.Establish the procurement goal.
oDefine the target consumer and the borders of the area impacted by the purchase as precisely as possible (i.e. dependencies on other projects, items and systems, the effects on business processes, etc.).

  • Determine whether the purchase is aligned with corporate goals and objectives. If the argument for the purchase cannot be justified along strategic lines, save yourself a lot of work by aborting the purchase and turning your focus toward more strategically relevant procurements.
  • Interview stakeholders and analyze their stakes in the procurement. 
  • Analyze costs and benefits.

2.Define procurement requirements. The most important part of the procurement process is planning out the details of the purchase. Keeping in mind that even good plans are susceptible to change, it is essential to ensure thorough version management of the goal and plan during the whole process. The list of requirements demands completion of the following activities:

  • Determine scenarios for receiving the product or service from the supplier.
  • Analyze the risks involved in the purchase. 
  • Plan the procurement within a risk management framework. 
  • Identify the main decision points, including timelines, type of supplier, type of tendering, flexibility of contracts, and project requirements.

3.Tender the offer. The objective of tendering is to select a supplier, and agree with a chosen supplier on a contract that defines deliverables and the responsibilities of both parties. The following activities are required to complete this step:

  • Evaluating the previous performance of suppliers (if the information is available).
  • Preparing a request for proposal (RFP). 
  • Evaluating the suppliers’ response proposals. 
  • Selecting the supplier that best meets the strategic needs of the organization. 
  • Preparing a supplier contract for the delivery of products or services.

4.Monitor supplier deliverables. This step aims to monitor the procurement objective as defined in the contract, i.e. to ensure that the deliverables conform to the requirements. Therefore, a defined number of contract status reports should be prepared during the project. The purpose of these reports is to minimize the risk of unfulfilled contract obligations, and to build a performance knowledge base of the supplier.

5.Complete the procurement. This task ensures that all outstanding issues regarding the procurement have been concluded to your satisfaction. Activities to perform include:

  • Ensure all contracts are completed.
  • Assess the achievement of the procurement goal. 
  • Evaluate the results for future procurements, including supplier quality and areas to improve the procurement process.

In Summary

A strong procurement strategy aligns purchasing decisions with corporate strategy, increases bargaining power with suppliers, and boosts the value obtained from investments. In order to develop your procurement function, focus on processes and people.

Article Source: http://EzineArticles.com/4085000

December 11, 2014
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BY Bellwether
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