Developing a procurement process that is effectively tailored to a company's unique needs and operations is an ongoing effiort. Especially in today's highly dynamic business landscape, where the cloud and big data are speeding up market shifts and enabling firms to make faster decisions to greater end-results, the factors that determine the best sourcing strategy are constantly changing. Chief procurement officers need to be deeply in tune with other aspects of the business so that they can choose sourcing partners and manage supplier relationships in ways that streamline operations and reduce costs.
In this effort, CPOs will inevitably find that they have to make some tough decisions. Tying procurement management to core business strategies means doing away with techniques that simply aren't working - but first, corporate leaders have to learn how to identify these problem points.
Procurement as strategy
The core principle of strategic sourcing is that the methods and processes by which companies obtain goods and services need to be just as carefully planned for operational excellence as any other aspect of the business. A project undertaken by a group of MBA students provides an instructive example of how reevaluating procurement can provide a key starting point for boosting the effectiveness of an organization, increasing its profit margins and keeping costs down.
In a column for Triple Pundit, Terry Harrison, a professor at Penn State's Smeal College of Business, discussed how students in the university's MBA program are now working with the institution's procurement services department to get hands-on experience in implementing sustainable, cost-effective sourcing practices while also promoting green logistics within the university. The project began in 2008, when interested students in the Sustainability and Social Innovation concentration took over responsibility for sourcing the university's janitorial tissue paper products.
The procurement department had never before undertaken the effort to evaluate suppliers based on a clearly defined list of sustainability criteria, Harrison noted. The students chose new vendors and fostered these relationships. Since then, other procurement areas within the university have moved toward sustainability.
"Aligning existing organizational goals with sustainability goals has become increasingly important, particularly with regard to supplier selection, as organizations become more conscious and proactive in addressing issues in sustainability," wrote Harrison.
Eco-friendliness has become a popular component of business strategy - but this is just one area in which companies can align procurement with their operational goals. The key is for enterprises to think of sourcing as a process capable of transforming the organization for the better.