Embrace Frictionless Procurement by Living in the System

By David Morin October 7, 2019 by David Morin

Becoming a procurement leader in today’s rapidly changing environment often comes down to one key factor: those who actively manage to spend based on real-time insights will generate cost savings. Those who rely on traditional spend management practices will not. For your organization, that means knowing what is bought and how it is being bought and translating that knowledge into a stable and predictable process. It is only then that you can recognize consistent performance, unprecedented spend transparency, and reduced costs.

Organizations struggle to meet their goals because they fail to unite around a single source of truth. They end up dealing with outdated or unnecessary data, increased errors, loss of supply chain visibility, and no insight-to-action capabilities. Often, these issues stem from manual interventions and lack of process accountability and ownership. To grasp the optimization benefits that derive from an operations-wide focus on best practice, SAP leverage, and consistent predictability, organizations must first make a solid commitment. Doing so requires aligning business behavior with business rules.

How does an organization set forth on this journey? The first step is a recognition that master data will drive business rules governance: exception monitoring, process performance, and analysis. The questions you need to ask before you set out on your journey are: “Are you using your SAP system to ensure your process performance is stable, predictable, automated, and scalable? Is your inventory segmented, optimized, reduced and available? Are your business behavior and business rules in alignment?” The second part of the journey is to arrive at frictionless procurement, which removes labor-intensive manual procurement tasks from the procurement process.

The Four Pillars to Frictionless Procurement

Frictionless procurement rests on four common-sense pillars:

1. Manual tasks are labor-intensive and have an increased probability of not being consistently executed.
2. Process failures cause friction between supply chain entities that need to be resolved.
3. Crisis management is process-intensive and expensive and needs to be avoided if possible.
4. Removing this friction improves process efficiency and improves material service levels

To fully embrace frictionless procurement, you must dedicate yourself to discovering what it means to live in the system—breaking down siloes, driving integration, analyzing business rules and setting improvement targets. All things become possible when you trust your SAP system to deliver far greater visibility and real-time reporting and monitoring of supply chain procurement. Organizations like yours can reduce fluctuations, lower average stock inventory, avoid stock-outs, and reduce dead stock.

According to Reveal and its experience in supply chain management, organizations reduce spending by an average of 10-15%.  At the same time, they improve the performance, visibility, and usability of procurement processes and enable collaborative sourcing and contracting. In today’s highly competitive environment, that’s a good place to be.

Many companies look to their supply chains to save costs. Throughout this series of sourcing & procurement, we will dive into sourcing strategies that can help businesses reduce expenses and improve procurement performances.

For more information on this topic watch our recorded webinar or read our white paper on the topic of reducing purchasing spend by 10-15%, while still maintaining a high material availability.

Tags: Dead Stock, ERP system, Procurement, SAP, Stock-outs, Supply chain, Supply Chain Management