How can procurement measure and communicate its value and impact to the organization?

The Procurement area is a service provider to the organization. The business is their most important customer. They need to communicate frequently with the business to understand what the goals and pain points of the business are, how their KPIs drive business success, and how procurement can help in their supporting role for the business to be successful. Procurement should provide necessary information and data to support the business as it makes the critical decisions on its projects and negotiations.

Procurement measures its value and impact by evaluating the value it adds to business needs. Especially in the manufacturing industry this is primarily quantified through cost savings, cost avoidance, directly contributing to the organization's bottom line, and on-time performance which contributes to timely (end) customer deliveries. Many other contributions, such as ESG impact, can also be measured & considered based on business needs. The strategic importance of procurement within the organization is reinforced through effective communication of these contributions.

Procurement can measure and communicate its value by tracking cost savings, procurement ROI, supplier performance, and compliance with policies. Beyond cost, it showcases contributions to innovation, sustainability, and quality improvements. Regular reporting and success stories help demonstrate alignment with business goals. Continuous improvement is highlighted through internal and external benchmarking. Leveraging technology for data analytics and digital transformation showcases efficiency gains. Collaboration with other departments and involvement in strategic projects further emphasize procurement's critical role in the organization.

Procurement can innovate by showcasing not just cost savings but also by quantifying risk mitigation, supplier relationship enhancements, and overall operational efficiency gains to highlight its holistic value proposition within the organization.

These approaches align procurement activities with business goals, ensuring cost-effectiveness, risk management, and competitive advantage. Impact: They contribute significantly to organizational growth by enhancing efficiency and fostering innovation.

Strategic sourcing is important to have the cost, quality and delivery advantage by reducing / mitigating the risk exposure of the organizations.

Cost savings are vital, but strategic sourcing and innovation can do more than just cut expenses. They have the potential to boost the company's top line. By optimizing resources, we create opportunities for strategic investments, like enhancing brand visibility and driving sales. Innovation in packaging to digital services directly impacts turnover, offering new revenue streams. Let's harness these strategies to drive holistic growth and unlock new dimensions of success.

As a Director of Government Contracts, I strongly endorse the significance of strategic sourcing and innovation in procurement. These practices are not just about cost savings; they're about optimizing value and ensuring operational excellence. In government procurement, where accountability and efficiency are paramount, strategic sourcing helps us select suppliers that not only meet cost and quality standards but also adhere to compliance and ethical requirements. Innovation, on the other hand, drives process improvements and fosters agility, enabling us to adapt to evolving regulations and public needs. Together, they ensure that public funds are utilized effectively, contributing to trust and integrity in public sector operations.

Strategic sourcing and innovation are paramount for procurement as they collectively elevate the function from a transactional role to a strategic driver of organizational success. Strategic sourcing, with its focus on optimizing supplier relationships and negotiating favorable terms, ensures cost savings, improved quality, and risk mitigation. Concurrently, innovation within procurement, incorporating advanced technologies and forward-thinking methodologies, enhances operational efficiency, agility, and adaptability. This dynamic combination not only strengthens supply chain resilience but also positions procurement as a proactive force, contributing significantly to overall competitiveness and value creation for the organization.

Comments focus on cost savings, however there is often disagreement over how to measure savings. Also during current marketplace inflationary periods, cost savings calculations can be impractical and inaccurate. Here at the County of San Diego, we have focused on measuring our value by our Customer service, timeliness, and expertise ratings (did we give our Customers options). Our success is measured by assessing how we supported our Customer's objectives and mission by getting them what they needed (features and quality); when they needed it (schedule); and a fair and reasonable price. I didn't say lowest price, because there is often trade-off considerations between other factors and price. We deliver Best Value procurement service.

Procurement professionals need implement objectives at match their organization's priorities and goals. Just measuring typical metrics like cost savings and avoidance is not sufficient. For example, here in San Diego County we are requiring and measuring "Local/Small/Disadvantaged Business Community Engagement and Participation plans" for our design-build construction projects. These competitively submitted plans are evaluated and are a 20% factor in our Best Value selection. These plans are made part of the resulting contract with a price adjustment "at risk" if not achieved. This is procurement's role in convincing leaders and successfully implementing innovative contracting to add value to the community. 40% commitment is a recent award.

1.Tracking cost savings, total cost of ownership, supplier performance metrics. 2.Evaluating risk management, quality improvement. 3.Fostering Collaboration with suppliers. 4.Monitoring Process compliance. 5.Assessing customer satisfaction and analyze financial performance. By following these metrics we can ensure that procurement aligns with organizational goals and contributes to overall success.

While cost savings and other hard numbers are important, simply reporting numbers does not show the value proposition! Find out what "stretch goals" your leadership was able to fund, based on the "profit" you created. Then report THAT information. Be sure to congratulate the end users for making it happen (as your partner in procurement.) Make it Real.

In the public sector, measuring procurement's value and impact is crucial for transparency and accountability. We focus on quantifiable metrics like cost savings and avoidance, ensuring taxpayer money is used efficiently. However, it's not just about numbers. We also assess supplier performance, compliance with regulations, and the effectiveness of our sourcing strategies. Innovation contributions and sustainability measures are vital too, reflecting our commitment to ethical and environmentally responsible practices. By aligning these metrics with our broader organizational goals, we can demonstrate procurement's role in not only saving money but also in driving positive, long-term societal impacts.

In my experience, combining effective measurement metrics such as cost savings achieved, improvements in supplier performance (including on-time delivery, quality, and reliability), Cycle Time Reduction, Supplier Diversity and Sustainability, product or process innovation, improvements in procurement processes, cost reduction and strategic sourcing, and value-added services with strategic communication, procurement can showcase its value and impact, fostering a better understanding of its role in contributing to the organization's success.

It's also important to be able to present data and facts to the business, in areas where procurement underpins the key strategic priorities. Areas to considers are: sales and margin by category product availability stock health customer or quality complaints customer metrics including footfall, volume etc

Advocate for clear, concise reporting mechanisms like dashboards that highlight procurement's achievements and align with organizational objectives. Stakeholder Engagement: Emphasize the importance of regular, transparent communication with all stakeholders to demonstrate procurement's strategic role.

As my colleague Barb Johnson discussed, I think in Public Procurement, one of the keys is identifying what the entity's leadership really wants from Procurement. Not to be confused with sound bites elected officials may give.

Align with Organizational Goals,Key Performance Indicators(KPIs),Storytelling,Visual Representation,Customized Reporting,Stakeholder Engagement,Educational Initiatives,Participate in Cross-Functional Meetings,Highlight Innovation,Environmental and Social Impact,Regular Reporting,Interactive Communication Channel,Involve Procurement in Strategic Conversation,Transparency in Saving,Employee Recognition,Continuous Improvement Updates,Feedback Mechanism,Professional Certifications and Accreditations,Customer Satisfaction Survey.Leverage external recognition or awards received by the procurement function to validate its impact and value, as it'll contribute to build a positive perception of the procurement function within the organization.

No hay formulas mágicas, para mi son 7 elementos escenciales que deben hacer parte de la agenda de un área de abastecimiento: 1. Gestión de Categorías de Compras 2. Desarrollo de Proveedores 3. Gestión de Riesgo del Aprovisionamiento 4. Incrementar la satisfacción del Cliente Interno 6. Mantener viva y comunicada la Política de Compras con todos los elementos que hacen parte de ella 7. Resiliencia, Adaptación y Sentido de la Urgencia

First of all,you must understand the importance of strategic sourcing You should do market data analysis, study the procurement & sourcing principles, methodologies for sourcing, cost estimation etc This is required one small diverse team to apply all minds at one place. Like a group of Mech, electrical,instrument, Procurement & Finance members. Also one old member who has been working in the same industry for a long time. This team has to do brain storming on ideas & ways of doing the activities. Brainstorming is most important activities to improve strategic sourcing and innovation in organisation For achievement, the team must be extraordinarily rewarded & motivated. Need kick and boost to the team for their extra ordinary efforts.

Encourage continuous learning in critical areas such as market analysis, negotiation, and supplier management. Networking and Collaboration: Promote engaging with industry peers and experts to exchange knowledge, trends, and best practices.

In order to enhance your sourcing acumen and value proposition you need to be a great listener. Understand and be able to communicate the "pains" of the business and accurately articulate the vision statement for your stakeholders. This partnership is paramount to the success of one another. The more communication FROM the stakeholders will generate more communication TO the stakeholders on the market opportunities and solutions.

Developing market intelligence and Supplier relationship management gives access to the latest developments in the category / industry, which provides basis to develop innovative approaches in Strategic sourcing. In turn, this will also provide path forward for reducing / mitigating supply chain related risks.