Procurement can play a critical role in helping finance organizations by reducing spend or costs and improving overall financial performance. 95% of CxOs of global product manufacturing companies confirmed that procurement value creation is part of the company’s overall strategy in the coming years. Approaches include negotiating better prices with suppliers, identifying cost savings opportunities, and implementing more efficient processes.
Strategic sourcing is the process of identifying and selecting suppliers based on factors such as cost, quality, and delivery, and can be used to generate positive business impact. By conducting a thorough analysis of the market and identifying the best suppliers for specific goods and services, procurement teams can negotiate better prices and terms with suppliers, resulting in significant cost savings for the organization.
Spend analysis involves analyzing an organization's spending data to identify areas of opportunity for cost savings. By understanding where an organization is spending its money, procurement teams can identify areas where costs can be reduced and negotiate better prices with suppliers. Additionally, spend analysis can also help organizations to identify areas where they may be overspending and make adjustments accordingly. FactWise provides an extensive suite of historical, RfX, and supplier analytics to minimize the need for manual, Excel-based analyses.
Supplier risk management is another way for procurement to support finance organizations. This includes assessing the financial stability of suppliers, their ability to deliver goods and services on time, and the quality of their products or services. By identifying and mitigating these risks, procurement teams can help to ensure that an organization's operations are not disrupted by supplier-related issues, which can have a significant impact on financial performance.
Procurement can also help finance organizations by improving the efficiency of their processes. By implementing automated systems and processes like FactWise’s automated quadruple validation, procurement teams can streamline the purchasing and goods tracking processes and reduce the time and resources required to manage the end-to-end procurement cycle. This can lead to significant cost savings and improved financial performance.
Let’s consider a real-world example of a retail bank that was struggling with high costs and low profits to see how procurement can help finance organizations. The bank's procurement team conducted a thorough analysis of spend data and identified several areas where costs could be reduced. They negotiated better prices with suppliers, implemented more efficient processes, and improved their supplier management practices. As a result, the bank was able to reduce costs by 20% and increase profits by 15%.
Another case is that of a multinational manufacturing company that was facing significant risks from its suppliers. The company's procurement team identified the risks and put in place mitigation strategies that included assessing the financial stability of suppliers, implementing supplier performance management processes, and implementing a comprehensive supplier risk management program. As a result, the company was able to reduce supplier-related risks and improve its overall financial performance.
In conclusion, procurement can play a critical role in helping finance organizations to reduce costs, improve financial performance, and mitigate risks. By conducting strategic sourcing, spend analysis, supplier management, and implementing more efficient processes, procurement teams can ensure that an organization's operations are not disrupted by supplier-related issues and can make adjustments accordingly to achieve cost savings and improve overall financial performance.