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Procurement and Supply Chain

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Global supply chain resilience has been tested with the disruption brought by the pandemic. While at a significant cost to many organisations, it also provided an opportunity to redefine procurement and supply chain functions and ensure they are prepared to successfully navigate future turbulence.

As the threat subsides, organisations may be tempted to return to long-established practices; however, these legacy practices reintroduce risk and undermine the commercial pragmatism that made procurement and supply chain functions the heroes of the hour during the pandemic. As waters calm, there is time for organisations to undergo a full procurement transformation to firmly embed hard-fought victories achieved during COVID.

To successfully transform your procurement function, we see both common and emerging business challenges that must be brought to the surface and actively managed:

Embedding a true customer-focused lens to the supply chain

Changing the organisation mindset of procurement

Plugging savings leakage across the organisation

Driving spend to responsible suppliers

This is a time to embrace the opportunity to rewrite the rulebook and adopt a permanent customer-centric service model to maintain the elevated position of the supply chain function.

The value placed on an organisation's procurement and supply chain function was never more significant than at the emergence of Covid-19. Amid global disruption, many organisations formed crisis teams to transact in new and efficient ways.

While mostly reactive, the actions taken over the last year demonstrated how agile organisations can be when necessary. The path to gaining ‘hero’ status in supply chain functions should not be brushed aside. A huge opportunity is lost by taking the stance of: “Now let's just move on and make sure that we can recover our profitability.”

Full enablement

Having weathered the storm, a savvy organisation will not reach for the rulebook but instead fully enable their supply chain to permanently pivot – continuing to evolve the way they transact and serve internal customers as they had during the pandemic.

Many procurement teams have a limited scope of influence within their organisations. They struggle to move beyond being perceived as a ‘transactional function’ that enforces rules and is simply there to purchase goods and services at a competitive price. Procurement is uniquely positioned to evolve to become a value-adding business partner to any organisation by transforming how it delivers value.

A commonly held view within organisations – particularly within operations – is that procurement is a bottleneck, and non-value-adding due to its lack of customer-centricity and slow turnaround times.

The benefits brought by procurement are often opaque as it is perceived to be a reactive, service function and not fully embedded as a holistic part of the organisation. To achieve the full benefit, procurement should instead be positioned as a proactive function serving a pivotal and evolving role in moving the organisation forward.

Open to change

Embedding processes that ensure that procurement works hand-in-hand with stakeholders enables organisations to collaborate with suppliers and develop solutions that capture shared benefits.

Collaborative sourcing is part of a long-term relationship between operations and procurement, rather than a short-term, antagonistic ‘quick fix’ – thus enabling a new business model where ‘rules’ are not fixed but open to change.

Savings focused on projections can easily trip up budget owners who may ‘unknowingly’ forgo or spend the savings as they arise. This ‘leakage’ can become a torrent if not addressed at the outset of new contracts and re-negotiations.

Savings leakage is the result of a methodology that relies on eye-catching figures but not correctly capturing value or factoring it into the bottom line. Procurement organisations may believe they have achieved savings, but often mistakenly have ‘calculated themselves rich’ by focusing on projected savings rather than realised savings.

Newly-renegotiated contracts may hold the promise of significant cost savings. However, without robust processes in place that hold suppliers to contract terms and ensure no off-contract purchasing, these savings may never reach an organisation’s bottom line.

Active mindset

It is critical to instil a continuous improvement mindset – always looking for and leveraging opportunities to positively move the dial and report true savings, thereby avoiding a deepening divide between the procurement and operations function.

We bring a portfolio of sourcing methodologies to bear, depending on the requirements of a client. While the approaches may differ, they are aligned by a no-nonsense approach to identify, quantify and track hard-dollar savings.

What does it mean to re-assess your suppliers to mitigate sourcing risks? For many organisations, it is about setting out a roadmap that alleviates unpredictability to reward suppliers that adhere to clear social and environmental standards.

An overreliance on capturing savings at all costs can lead to unforeseen vulnerabilities and a sourcing approach that is reactive only when the worst has already occurred.

The momentum for strong corporate responsibility strategies is growing and involves overhauling long-standing supply chain relationships to adopt a proactive, long-term lens to approaching and rewarding suppliers whose practices and engagement are both ambitious and aligned.

A lack of transparency can lead to situations in which organisations quickly fall afoul of potentially damaging public relations. We believe you must dig deep to identify reputational and operational risks in the supply chain and then quickly transition to action.

A proactive approach to responsible sourcing carries the benefits of lowering potential risk while ensuring the long-term stability of supply chains.

Tom Sonnen

Procurement and supply chain teams have never had a more prominent seat at the table. Across industries, there is a great appreciation for how they quickly adapted to what has been a rapidly changing, often volatile landscape. Organisations should use the learnings of the pandemic and holistically build on that momentum. There is a unique opportunity for full-scale procurement transformation to drive lasting value across the supply chain – a supply chain that is stronger, more resilient and fully prepared for potential disruption.

Tom Sonnen

Director

By employing a holistic approach that brings broader coverage, with a focus on agile, commercial pragmatism, we have helped many of our clients to successfully navigate these business challenges and embark on their transformation journey.

We look beyond procurement as a commercial exercise, applying a lens to find blind spots borne of conventional thinking and drive the most beneficial outcomes. Taking an operations perspective and a behavioural change mindset, we partner with our clients to ensure effective communication at all key points and across all stakeholders – delivering a true and lasting transformation.

Overall, we move our clients away from being process-and compliance-centric and burdened with complex governance, toward a simple process, with a commercially pragmatic focus on results and effective holding to account.

Organisations can achieve >10% savings and capture 100% of value through the roll-out of a procurement transformational program

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3-8% savings in tail spend in 8-12 weeks

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10-45% savings in category sourcing in 16 weeks

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100% capture of savings through sustainable capability building

Client success stories

Success

Social Progress Program designed to generate incremental value of US$2.4bn across local communities within 18 months

Leveraged global scale to deliver sourcing savings of $51m in six months

$44.5m annualised procurement savings and a further $28m identified for an energy provider

Meet our Procurement and Supply Chain leadership

Tom Sonnen

Tom Sonnen

Director

South East Asia

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