HOW PROCUREMENT CAN MEET CUSTOMER DEMAND The market situation is getting evermore complex. Changes in customer demands require ongoing focus on innovation and time to market. But risk also needs to be addressed as the market place is getting disturbed by pandemics, trade wars and local agendas. A recent study by Horváth & Partners¹ shows that management increasingly wants the procurement function to act as a driver for innovation and mitigating business risks in the supply chain. So how do procurement departments cope with this complexity, yet still meet demands for innovation and customer-centric solutions? We find that the will and intentions are present in most procurement departments and organisations in general, but they do not always have the time and competences to focus on business value. Resources and skills are part of the solution, but efficient sourcing processes and decision roadmaps are equally important. Unfortunately, we often come across inefficient sourcing processes designed to maintain current business, and opportunities are missed due to poorly prepared (or no) opportunity identification surveys and change management processes. At the end of the day, the solution to these challenges is to make this an executive priority. The full potential of your procurement department can only be realised when cost and innovation become an integral part of the executive agenda. As long as these challenges remain in the procurement department, the full value realisation will not happen. The entire executive team needs to take ownership of ambitions, business goals and change management in collaboration with the CPO. If this is done, it is possible to realise the potential for major value-add to the business as the following two examples illustrate: DSB, the largest train operating company in Denmark, renewed a number of strategic service and spare part agreements. The organisation was able to establish a strong contractual basis as a result of thorough market dialogues, dedicated internal specialists and prioritised targets and decision-making processes. This contractual basis did not only ensure DSB deliverables at a value of DKK +100m per annum but also set a new standard for optimisation and management of the entire supply chain. “We have learnt the value of solid planning with clear targets and priorities as well as consistent action in accordance with the plan. A strong management involvement throughout the process strengthens our cooperation with our suppliers as early as the implementation of the agreement.” Mette Rosholm, EVP, Legal and Procurement, DSB ¹ Read the study by Horváth & Partners here: https://www.horvath-partners.com/en/media-center/studies/what-reallymatters-to-the-cfo-the-cfos-expectations-towards-the-procurement-function/ 3
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