Procurement opportunities are defined as situations where the use of procurement concepts can save an organization. These opportunities are usually centered around cost savings, increased efficiency, and reduced overhead expenses related to purchasing activities. The primary concept of strategic procurement is that through advanced planning, scheduling, and group buying initiatives, a firm can experience significant cost savings.
The implementation of strategic procurement within a company requires focus on three procurement concepts: using procurement data management systems, group buying and centralized procurement services. The concepts in strategic procurement require communication and cooperation between the business unit, financial services, and procurement to be implemented effectively. Even a simple concept, such as encouraging planned purchasing, can cause major operational issues if not discussed with the business unit.
Identification of procurement opportunities also requires communication between multiple areas. Most companies use the services of a procurement or business analyst to help identify these areas. The primary purpose of this role is to review procurement-related activities over a period of time and determine the dollar savings that could be achieved through the implementation of standard procurement concepts.
A great place to start looking for procurement opportunities is in repetitive purchasing. Look at a commodity or product that is fairly generic and is required across a range of departments. Office supplies or computer paper are great examples of this type of product. Reviewing the procurement data, look at the number of suppliers that are currently used to meet this need, and determine the total spent on these commodities over a three-year period.
Issue a request for proposal (RFP) to either all suppliers or the suppliers currently used by the firm. In your RFP, list the basket of goods that you require pricing for, delivery needs, terms of payment, and any other specific requirements. Review the responses and select the supplier that offers the best combination of price, quality, and service. There should be a significant savings between the amount spent with multiple suppliers and the costing from a single firm.
Another great way to identify procurement opportunities is to look at the administrative aspect of procurement. Determine how much time is currently spent selecting suppliers, obtaining quotations, and meeting with sales staff. Select a commodity with a high volume of transactions and create a preferred vendor list. Create a negotiated pricing agreement with these firms and then provide the list to the departments. This process eliminates much of the non-value adding work and creates a more efficient process.
