Process optimization is the result of an organization鈥檚 need to improve its internal operations to make its activities more efficient and agile without compromising the quality level of the product or service offered to its clientele. For any sector (private or public), the different procurement departments also need to optimize their various processes. Some examples include management of purchase requests, cost control, engagement of potential bidders in call for tenders and inventory management. These examples are only a small sample of the processes involved in procurement. 聽
To fulfill the mission of a procurement department, a review of its processes in place is necessary to identify, among other things, bottlenecks and tasks that do not add value to operations. Process optimization will lead to greater agility and efficiency in the services offered and needs to be met by the different internal stakeholders. Moreover, a procurement department can be a contributor to the desired leverage effect on the profitability of a company or financial strength of a public body. Here are some examples of optimization that create value through strategic procurement and supplier relationship management.聽
Just-in-time (JIT): Planning and data collection will help to 鈥減redict the future鈥� of needs and requirements. Of course, there will be exceptions (e.g. urgent repair due to unexpected breakage), but it is possible to synchronize the supply of goods under contract with a projected demand based on usage statistics and this, to avoid disruption while minimizing inventory levels.聽
Optimization of the flow of goods: Offering a level of visibility to its suppliers allows better coordination and thus, enables them to order their products or raw materials in an optimal quantity, at a lower cost. This proactive collaborative approach can help reduce delivery times and purchase prices, keep inventory levels under control and reduce the risks associated with an unstable supply chain.聽
Competitive price negotiation: When purchasing goods and services in situations that exempt the acquisition from competitive tendering, an efficient procurement department can reduce costs through negotiations with its suppliers, such through volume discounts, service inclusions at no additional cost, or other advantageous terms.聽
Alternative sourcing: Identify alternative suppliers of the same type of products and services in order to minimize its dependence on a single source.聽
Sustainability: This will, for example, confirm that businesses have integrated EDI (Equity, Diversity and Inclusion) into their practices or have developed a strategy to combat forced labour in their supply chain. A procurement department focused on having a sustainable and ethical supply chain minimizes its risks of its organization being associated with unethical practices and enhances its credibility as a socially responsible entity.聽聽聽
A thorough search of the companies that are part of the ecosystem of the product or service sought will allow the procurement department to learn about what the market offers, and whether the market is full of potential suppliers or whether it is a monopoly where bargaining power is on the supplier鈥檚 side. This market research constitutes a critical step in identifying procurement optimization opportunities and enhancing its efficiency.
One of the initiatives of 韩国裸舞鈥檚 Procurement services and the DataSphere Lab is to develop an advanced market research tool, powered by artificial intelligence that will allow buyers to better understand and identify the structure and relationships of different businesses in a targeted market. Work on the development of the tool will begin in January 2025. Conducting market research is the first essential step in identifying opportunities for procurement process optimization by providing the knowledge needed to make informed strategic decisions.聽
Conclusion:
An effective procurement department acts as a strategic lever by combining the objectives of cost reduction, efficiency increase and value creation. By optimizing procurement and supplier relationships, it contributes directly to the performance of the company or public body.聽