Increasingly, the modern enterprise is looking to procurement to contain costs, increase resilience in the supply chain, meet ESG goals, and be a source of innovation within the business as a whole. It’s also important to remember, however, that the fundamental goal of procurement is to ensure the business has the raw materials, goods, and services it needs when it needs them. If that goal isn’t being satisfied, then all the ESG targets or generative AI deployments in the world are meaningless. Procurement is, at the end of the day, about executing that primary goals as efficiently as possible, so we’ve put together our list of the top 6 ways to improve procurement efficiency in 2024.
1. Make use of your data
Procurement departments are often in possession of some of the richest reserves of data in the business, but many procurement teams either still don’t have enough data, can’t trust their data, and/or lack ways to effectively utilise that data, whether that means using it to make informed decisions about suppliers and purchasing, or making recommendations to the rest of the business.
Understanding and drawing insights from your procurement data can unlock meaningful, easily applied efficiencies for your procurement function, and CPOs should make getting their data in order a top priority.
2. Evaluate, iterate, reevaluate
Crafting the perfect procurement process is a fantasy. Crafting a very, very good procurement process is an ongoing process in of itself. Procurement is plugged into not only the business and its changing needs but the entire supplier ecosystem, which is affected by everything from changes in compliance to availability of raw materials. To ensure your procurement function is operating as efficiently as possible, it’s important to regularly evaluate your process, iterate changes, and then reevaluate to ensure you’re headed in the right direction.
3. Standardise your procurement policy
Many procurement teams struggle because of a lack of standardisation, which makes replicating successes across multiple buying instances a challenge. Purchasing materials and services to support the business becomes easier, quicker, and less prone to error when the process is standardised. Just make sure to reevaluate your procurement standards regularly, or they could become a source of new pain points.
4. Develop your workforce
In the midst of a global talent shortage, retaining the skilled procurement team members you have is essential. One of the best ways to retain staff that also benefits the business as a whole is through development—online learning, certifications, industry events, and extra training can all empower your team to use new technologies, adapt to the changing industry, and feel as though they’re getting more out of the job than just a paycheck.
5. Set up a feedback system
As highlighted in a recent piece in Vogue Business, there is sometimes a disconnect between the way buyers and suppliers perceive their relationships. If there’s a lack of communication and trust between different parties in the source-to-pay structure, it’s going to be challenging to get an accurate picture of your value chain, which can lead to all manner of inefficiencies and risk. Setting up a feedback mechanism through which suppliers and partners can give thoughtful, constructive feedback can dramatically broaden procurement’s perspective on the often complex landscape of their own ecosystem.
6. Fight dark purchasing
Unauthorised, invisible spending from outside the procurement department is a huge source of inefficiency in procurement. A recent audit of the UK’s National Health Service (NHS) found that the organisation spends roughly £3.4 billion a year outside its own approved supply chain, with estimates showing the health service spends around £8 billion a year on products.
Aligning the buying practices of the organisation as a whole with procurement can help contain cost and reduce risk. However, it’s important that this process be a two-way street. In the case of the NHS, while the products available through the sanctioned procurement channels were cheaper than those purchased by the NHS’ trusts, staff argued they were also of lower quality.
