People often distinguish procurement (or sourcing) and supplier relationship management (SRM) as two completely distinct functions. Nevertheless, these two functions interact and co-relate in very real and important ways. In fact, oftentimes procurement and SRM are two sides of the same coin – you can’t have one without the other. In this article, we are going to discuss the various ways that procurement and SRM combine for a complete supplier approach.
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Part of ensuring good results in business is setting up good relationships with your suppliers. That's the reason using good supplier relationship management tactics is a wise investment. You may think that because you are making the orders and payments to suppliers, you're in the dominant position and therefore, could make unreasonable demands. The simple truth is, to make things work in your favor as business owners, whenever you find excellent suppliers, you should treat them well and you should work towards creating a mutually advantageous relationship with them.
How many times have you, the procurement professional, established an enterprise-wide contract only to find your staff making purchases from other suppliers? Even worse, when you find out that they are making purchases from other suppliers, you realize that they are making purchases at a cost that is very unfavorable to the contract that you have established both for strategic and cost reasons! There is a term for this in the procurement industry, and I guarantee you’ve heard of it: maverick buying. The purpose of this article is to present some important ideas on how you can prevent your staff from engaging in this cost-wasting practice of maverick buying.
In the manufacturing world two very common terms are procurement and sourcing. To the unknowing person, these terms often have the same meaning, but this is incorrect. Although these terms are often used interchangeably, their meanings are different enough that interchanging the two terms can lead many to confusion.
The most likely reason these two terms are freely interchanged is because they both involve purchasing. The terms procurement and sourcing both lie under the large umbrella that is purchasing. Since purchasing is a very general term, it gives the two terms vaguely similar meanings. Each term is a method in which a company can obtain goods or services that meet customer’s needs at the lowest possible cost. In addition to finding an affordable way to obtain goods and services, procurement and sourcing methods must also avoid sacrifices in quality or service. The difference between the two is that although procurement lies under the purchasing umbrella, it also has aspects that come out from under the umbrella, making it a bit more than just purchasing.
eProcurement can be of enormous value to companies of all types, and particularly to manufacturing companies. eProcurement provides numerous benefits to companies that employ this strategy, including the reduction of costs, the elimination of paperwork, as well as reduced manual labor and errors. eProcurement, when fully implemented in all departments, can also lead to a total visibility of spend, which leads to the ability to conduct spend analysis and to manage spend as well.
When conducting eProcurement, it is possible to obtain items from a catalogue of approved items, making the procurement process very streamlined and efficient. When conducting eProcurement, time is saved such that staff can work on high value transactions, and can concentrate on strategic sourcing and on improving supplier relationships. In short, eProcurement can be of enormous benefit to your company. In this article, we outline the various ways that eProcurement can lead to reduced cost, increased efficiency, and overall strength for your company.
On a global level, procurement organizations are evolving with the ever-changing world to continue to deliver value to their business. Today, the goals of procurement departments go well beyond simple monetary advantages, despite facing numerous thresholds such as: supply market volatility, supply chain disruptions, rising costs of raw materials, and talent shortages. These challenges are only increasing in volume and strength, forcing procurement organizations to continue to transform and help power their business through the setbacks.
According to a study by My Purchasing Center, research put out by consulting, technology service, and outsourcing giant, Accenture, procurement leaders are changing their strategies. The study says these forerunners are “transforming procurement from a cost-focused function to one that adds new levels of value, reflecting the mastery they have achieved across six measures.” The study focused on mastery behavior in strategy, sourcing and category management, supplier relationship management, requisition to pay processes, technology enablement, and workforce and organizations.