Best Practices for Procurement Savings<\/h3><\/div><\/div><\/div>PurchTips edition #446<\/p>\n<\/div>
Explore Best Practices for Procurement Savings<\/h4><\/div><\/div><\/div>The Modern Procurement Department is required to realize\u00a0procurement savings objectives by utilizing various means. Traditional methods focused on quality, delivery, terms, warranty, negotiations, contracts with a hyper-focus on price. Price has traditionally been the most critical Key Performance Indicator, not the Total Cost of Ownership (TCO). Indeed, TCO has been seen as \u201ctheory\u201d, and not to be examined in a practical sense. Today\u2019s\u00a0Procurement Leaders<\/strong>\u00a0are required to leverage their departments and supply chains to Gain Competitive Advantage.<\/p>\nThe Mission of Modern Procurement is best realized by looking beyond price for Cost Reduction<\/em>.<\/em><\/strong><\/p>\nThe following are Best Practices for realizing Procurement Savings:<\/h2>\n\n- Leveraging Design for\u00a0Strategic Procurement:\u00a0<\/strong>This is realized by designing your Procurement Function in such a way that it is underpinned by two axes:\n
\n- Enabling Value Creation<\/strong>\u00a0\u2013\u00a0Value is assessed primarily from the perspective of customers<\/em>, then by stakeholders. The understanding that organizations exist to create value for its customers is paramount. Value in itself has three components,\n
\n- A transformation from one stage to the next exist<\/li>\n
- All activities involved in the transformation processes are done right the first time<\/li>\n
- Your customers are willing to pay for the resulting products and services.<\/li>\n<\/ul>\n<\/li>\n
- Enabling Corporate Strategies<\/strong>\u00a0\u2013 Your Procurement Savings Department Processes should be designed in a manner in which they are fully integrated into and support he realization of your Corporate Strategies and Objectives. Therefore, all the activities in your Procurement Function create cause and effect relationships with Corporate Strategies.<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n
\n- Leveraging an Annual Buying Plan:<\/strong>\u00a0An\u00a0Annual Buying Plan<\/em>\u00a0leverages several critical components to assist in cost reduction initiatives:\n
\n- Categories to be Procured<\/li>\n
- Forecast of quantities to be procured<\/li>\n
- Savings and Operational Targets<\/li>\n
- Methods to be leveraged to execute the dimensions of the Annual Buying Plan<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n
\n- Unlocking savings by exposing and eliminating the 7 Wastes:\u00a0<\/strong>The\u00a07 Deadly Organizational Wastes<\/em>\u00a0are an ocean for Cost Reduction and Savings Opportunities.
\nThese 7 Wastes are:<\/strong><\/p>\n\n- Excess Inventories<\/li>\n
- Excess Motion<\/li>\n
- Excess Transportation<\/li>\n
- Excess Waiting<\/li>\n
- Over-Production<\/li>\n
- Over-Processing<\/li>\n
- Defects<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n
\n- Unlocking savings by reducing the 6 big losses:<\/strong>\u00a0There are\u00a06 major losses in business<\/em>, and the cost to organizations can be staggering.
\nThe 6 Big Losses are:<\/strong><\/p>\n\n- Unplanned Stops<\/li>\n
- Planned Stops<\/li>\n
- Small Stops<\/li>\n
- Slow Cycles<\/li>\n
- Production Rejects<\/li>\n
- Startup Rejects<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n
\n- Continuous Collaboration with Upstream and Downstream Processes:\u00a0<\/strong>This involves collaboration with suppliers, strategic partners, internal departments, and customers. The key is to understand their interest, have them understand yours, and negotiate methods on the deployment of innovation, technology and knowledge transfer, and cost reduction opportunities<\/li>\n<\/ol>\n
\n- Continuous Source to Pay Process Improvement:\u00a0<\/strong>This involves the deployment of Process Improvement Methodologies such as LEAN, Lean Six Sigma, and Kaizen. These methods focus on problem definition, impact assessment, root cause analysis, solution selection and control processes. These initiatives have saved billions of dollars around the globe<\/li>\n<\/ol>\n
PurchTips edition #446<\/p>\n<\/div>
Explore Best Practices for Procurement Savings<\/h4><\/div><\/div><\/div>The Modern Procurement Department is required to realize\u00a0procurement savings objectives by utilizing various means. Traditional methods focused on quality, delivery, terms, warranty, negotiations, contracts with a hyper-focus on price. Price has traditionally been the most critical Key Performance Indicator, not the Total Cost of Ownership (TCO). Indeed, TCO has been seen as \u201ctheory\u201d, and not to be examined in a practical sense. Today\u2019s\u00a0Procurement Leaders<\/strong>\u00a0are required to leverage their departments and supply chains to Gain Competitive Advantage.<\/p>\nThe Mission of Modern Procurement is best realized by looking beyond price for Cost Reduction<\/em>.<\/em><\/strong><\/p>\nThe following are Best Practices for realizing Procurement Savings:<\/h2>\n\n- Leveraging Design for\u00a0Strategic Procurement:\u00a0<\/strong>This is realized by designing your Procurement Function in such a way that it is underpinned by two axes:\n
\n- Enabling Value Creation<\/strong>\u00a0\u2013\u00a0Value is assessed primarily from the perspective of customers<\/em>, then by stakeholders. The understanding that organizations exist to create value for its customers is paramount. Value in itself has three components,\n
\n- A transformation from one stage to the next exist<\/li>\n
- All activities involved in the transformation processes are done right the first time<\/li>\n
- Your customers are willing to pay for the resulting products and services.<\/li>\n<\/ul>\n<\/li>\n
- Enabling Corporate Strategies<\/strong>\u00a0\u2013 Your Procurement Savings Department Processes should be designed in a manner in which they are fully integrated into and support he realization of your Corporate Strategies and Objectives. Therefore, all the activities in your Procurement Function create cause and effect relationships with Corporate Strategies.<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n
\n- Leveraging an Annual Buying Plan:<\/strong>\u00a0An\u00a0Annual Buying Plan<\/em>\u00a0leverages several critical components to assist in cost reduction initiatives:\n
\n- Categories to be Procured<\/li>\n
- Forecast of quantities to be procured<\/li>\n
- Savings and Operational Targets<\/li>\n
- Methods to be leveraged to execute the dimensions of the Annual Buying Plan<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n
\n- Unlocking savings by exposing and eliminating the 7 Wastes:\u00a0<\/strong>The\u00a07 Deadly Organizational Wastes<\/em>\u00a0are an ocean for Cost Reduction and Savings Opportunities.
\nThese 7 Wastes are:<\/strong><\/p>\n\n- Excess Inventories<\/li>\n
- Excess Motion<\/li>\n
- Excess Transportation<\/li>\n
- Excess Waiting<\/li>\n
- Over-Production<\/li>\n
- Over-Processing<\/li>\n
- Defects<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n
\n- Unlocking savings by reducing the 6 big losses:<\/strong>\u00a0There are\u00a06 major losses in business<\/em>, and the cost to organizations can be staggering.
\nThe 6 Big Losses are:<\/strong><\/p>\n\n- Unplanned Stops<\/li>\n
- Planned Stops<\/li>\n
- Small Stops<\/li>\n
- Slow Cycles<\/li>\n
- Production Rejects<\/li>\n
- Startup Rejects<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n
\n- Continuous Collaboration with Upstream and Downstream Processes:\u00a0<\/strong>This involves collaboration with suppliers, strategic partners, internal departments, and customers. The key is to understand their interest, have them understand yours, and negotiate methods on the deployment of innovation, technology and knowledge transfer, and cost reduction opportunities<\/li>\n<\/ol>\n
\n- Continuous Source to Pay Process Improvement:\u00a0<\/strong>This involves the deployment of Process Improvement Methodologies such as LEAN, Lean Six Sigma, and Kaizen. These methods focus on problem definition, impact assessment, root cause analysis, solution selection and control processes. These initiatives have saved billions of dollars around the globe<\/li>\n<\/ol>\n
The Modern Procurement Department is required to realize\u00a0procurement savings objectives by utilizing various means. Traditional methods focused on quality, delivery, terms, warranty, negotiations, contracts with a hyper-focus on price. Price has traditionally been the most critical Key Performance Indicator, not the Total Cost of Ownership (TCO). Indeed, TCO has been seen as \u201ctheory\u201d, and not to be examined in a practical sense. Today\u2019s\u00a0Procurement Leaders<\/strong>\u00a0are required to leverage their departments and supply chains to Gain Competitive Advantage.<\/p>\n The Mission of Modern Procurement is best realized by looking beyond price for Cost Reduction<\/em>.<\/em><\/strong><\/p>\nThe following are Best Practices for realizing Procurement Savings:<\/h2>\n
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\nThese 7 Wastes are:<\/strong><\/p>\n\n
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\nThe 6 Big Losses are:<\/strong><\/p>\n\n
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