Improving Procurement And Sourcing Efficiency

1475 Words6 Pages
Pursuit for competitive advantage is vital for the survival of any business organization’s supply chain. Businesses are feeling the difficulty to improve procurement and sourcing efficiency. The value that can be achieved through successful procurement practices is often a lot harder to achieve than many companies actually realize. If a company expects to grow and survive, it constantly needs to add value. Procurement is one area that has become a critical area of focus to create a more competitive and efficient supply chain. In the past, procurement was seen as insignificant to other areas of an organization. However, implementing cross-functional teams to continually review suppliers ensures that an organization benefits from the best…show more content…
Fortune 500 companies like IBM, Dell, and Delta Air Lines are spending higher than 50% of their revenues on procurement. For a long time, procurement has been looked at as negotiating to get better prices. Many organizations still view procurement as a way to influence spending to get discounts and lower costs from their suppliers. However, sustainability and the supply chain risks that companies face today call for procurement to be different now. Organizations can see real savings by looking at total cost of ownership, which can include a lot of the end-to-end supply chain costs. Disruptions are unavoidable and every decision involved in the procurement process has a risk factor to it. In order for procurement to influence and affect a company it must present a business case that it is a value added function. An organization can add value long term with its ability of purchasing within procurement. Organizations need to stop short-term thinking because of the high-risk levels associated with this. Procurement decisions can add a lot of value to a company, but organizations need to think of the long-term implications of their decisions. Purchasing is important to competitive advantage because it increases value and savings for a firm. Purchasing can build relationships, drive innovation, improve quality, and reduce products time-to-market. Suppliers have a huge impact on organizations total costs because most product features come from
Open Document