The "we can save you costs" story is a powerful one for catching the top-management eye, and is necessary to obtain initial buy-in to a change programme. The challenge though is to move perceptions beyond the cost saving milestone, otherwise it becomes a millstone. I have therefore found it more effective and relevant to talk in terms of the fundamental business equation "we buy, we transform, we sell", which places the procurement process, or better the Value Acquisition Process, properly at the heart of what is happening.
Dr. Richard Russill
The basis for decisions on investment and spending is fundamental to the successful performance of businesses. Implementation of effective supply market strategies will lead to optimum performance of the acquisition process itself. Spend decisions that rely solely on financial ratios without referring to other sources of information - such as the current positioning of the specific supply market - will be fundamentally flawed, since they will have failed to access key sources of intelligence.
Procurement, operating within an integrated decision-making environment, can proactively engage in the analysis process by reporting on the opportunities within the competitive supply environment and advising on the most appropriate buy strategy. Of equal importance, it will act as the conduit by which critical and preferred suppliers, already engaged in long-term trading relationships, will participate directly in the investment process. Their inputs may range from advice on simplification of specifications to innovative technical recommendations and contractual modelling in relation to funding and joint risk and reward arrangements.
It will be necessary for Procurement to evaluate suppliers in terms of innovation and development capabilities. Such external expertise will not centre solely on the production process - real value will only be achieved by improving the whole development cycle. In this environment, the role of the supplier will change from that of an arm's length provider of goods and services to that of a true partner. The supplier will proactively advise on the optimum investment strategy for the customer, and maintain a keen interest in ensuring that the customer makes the proper decisions to underpin the long-term business stability of both parties.
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