What does procurement value mean to you

Finally, the savings might get spent on unplanned needs — the available budget needs to be utilized in full. It is proposed to introduce several basic principles of savings management:. Supplier relationship provide a unique resource - knowledge, experience and creativity of suppliers to be used for the benefit of your company, for example:. Your supplier base is a bonus pool of potential customers. Most likely, they consume something similar to the produce of your company, and, perhaps, are served by your competitors.

Of course, attaching suppliers to your products will not be easy, especially if your competitors are their customers, as well. But to get at least portion of the supplier's budget is quite realistic. In general, the mentality of buyers should be constantly tuned to not only cutting costs, but also to generating new revenues.

The ways of transforming cost into revenue are specific to a company, market, industry etc. Previously, all revenues remained with the agency. Obsolete and faulty equipment, not allocated marketing materials, stands from past exhibitions, materials with an old brand - all these are tons of dead weight and millions of dollars on the balance sheet of the company. Identifying them, sorting by usability, determining the book value, preparing for sale or disposal - this is an incredibly complicated process that few people want to deal with.

You can barter any product or service produced or consumed by your company to eliminate sales, distribution or marketing overheads, and, most importantly, save cash. You can grow the client base, sell off dead stocks or reduce bad debts. You can also employ specialist companies offering e.

Any large company has significant marketing assets, for example, a website and social networks, regional offices or points of sale, even a fleet of vehicles. The key component is the clientele, thoroughly studied and classified.

Marketing assets can be offered to suppliers for advertising, brand promotion and targeted campaigns in exchange for revenues, discounts or similar assets to promote your own brand. For example, having a large fleet, the company can conclude an agreement with the automaker and lease cars of its brand with a significant discount, as they will be part of the marketing program. In the airline industry, manufacturers are willing to pay airlines for the opportunity to serve their products beverages, snacks and cosmetics or branded napkins and cups to the passengers.

You can co-brand a small outsourced warehouse or sell the name of a metro station, stadium or aircraft - the possibilities of marketing cooperation are truly limitless.

All over the world, there are programs to support small private entrepreneurs, war veterans, local crafts etc. Thus, your company will realize its social responsibility and improve its public image. Suppliers who are customers or marketing partners of your company and generate significant revenues can also receive certain preferences. Undoubtedly, your long-term strategic partners should enjoy some recognition in regular tenders - the main thing is that it is not based on a subjective assessment of an internal requestor, but clearly reflected in the tender evaluation.

Procurement can provide additional tools to motivate staff. For example, corporate travel discounts on air tickets and hotels can be extended to private travel of company personnel and their families. Your suppliers can provide offers to your staff or set up a temporary sales point in your office. In some companies, there are sections of a corporate website with special offers from suppliers, and discount cards are issued.

The staff discount program is specified in the employment contract, as one of the benefits provided to employees. The above examples are meant to demonstrate that procurement can add value not only by traditional price negotiations.

The revenue increases, the image of the company improves, relationship with suppliers is strengthened, the brand is promoted - all thanks to the comprehensive professionalism of the buyers.

Sign up to our daily bulletin. Already a member? Home News. Careers and skills. Supply chain. Supplier relations. JOIN Login. Instead, they would get the interviewees to talk about broad areas and follow up on those that had the most "emotional force".

In essence, they would get people talking and follow up on what is important to them. The interviews started broad, identifying the context under which the stakeholders operate and then "funneled" down to procurement and its role.

The interviewers probed with statements such as: "Tell me about your work," "Tell me about what works about Procurement," "Tell me what's missing regarding Procurement," and "Tell me about your ideal Procurement".

Not only did this open-endedness allow for Procurement to learn "what it doesn't know it doesn't know" but also allowed the interviewers to probe further the emotion-laden topics that the interviewees brought up.

When the sixty interviews were completed, the team synthesized the insights into a picture of what was happening. Here is a summary of what they had heard:.

Procurement's Value: Procurement's value derives from keeping me out of trouble with the suppliers, building flexible agreements that change with the changing needs, handling the negotiations, offering improvement ideas, being an advisor I trust, and getting 'best value' i.

What Works: What works about Procurement is that it consists of professionals who understand my business and are collaborators, side-by-side partners who help me get best value for the cost and ensure there's a full and competent supply base. What's Missing: There's a widespread perception that Procurement is highly cost-oriented, so it's hard to get them to focus on other things.

Some feel that Procurement moves on to savings opportunities rather than sticking around when there are issues. In addition, since customers need to be more nimble, they need Procurement to be more nimble. Ideal Procurement: The ideal Procurement would be a partner that: understands and is very close to our business; gives us advice that helps us avoid problems with suppliers; helps us create flexible contracts that can change with our strategy; helps us address issues with suppliers; helps ensure suppliers are performing well; and, is focused on maximizing value for the cost in contrast to just minimizing cost.

In one of the more insightful and entertaining aspects of the interviews, and technically the only question asked -- at the end of the interview participants were asked: "If Procurement were a form of transportation, what would it be? Another interviewee said, "Procurement is like a UFO -- here one day, gone the next.

List of Partners vendors. Procurement is the act of obtaining goods or services, typically for business purposes. Procurement is most commonly associated with businesses because companies need to solicit services or purchase goods, usually on a relatively large scale.

Procurement generally refers to the final act of purchasing but it can also include the procurement process overall which can be critically important for companies leading up to their final purchasing decision. Companies can be on both sides of the procurement process as buyers or sellers though here we mainly focus on the side of the soliciting company.

Procurement budgets typically provide managers with a specific value they can spend to procure the goods or services they need. The process of procurement is often a key part of a company's strategy because the ability to purchase certain materials or services can determine if operations will be profitable. In many cases, procurement processes will be dictated by company standards often centralized by controls from the accounts payable division of accounting. The procurement process includes the preparation and processing of a demand as well as the end receipt and approval of payment.

Comprehensively, this can involve purchase planning, standards, specifications determination, supplier research, selection, financing , price negotiation, and inventory control.

As such, many large companies may require support from a few different areas of a company for successful procurement. Some companies may even choose to hire a chief procurement officer to lead these efforts. A chief procurement officer can oversee the establishment of procurement standards, work with accounts payable to ensure procurement standard integration and efficient payment, and serve on procurement teams making procurement decisions when there are multiple competitive bids.

Procurement processing can be divided and analyzed from several angles. Companies and industries will have different ways of managing the procurement of direct and indirect costs. Goods companies, as compared with services companies, will also have different ways of managing costs. Direct spend refers to anything related to the cost of goods sold and production, including all items that are part of finished products.

For manufacturing companies, this can range from raw materials to components and parts. For merchandising companies, this will include the cost at which merchandise is purchased from a wholesaler for sales.

For service-based companies, direct costs will primarily be the hourly labor costs of employees performing services. By contrast, indirect procurement involves non-production-related purchases. These are purchases a company uses to facilitate its operations. Indirect procurement can involve a broad range of purchases including office supplies, marketing materials, advertising campaigns, consulting services, and more. Companies will generally have different budgets and processes for managing direct costs as compared with indirect costs.

Procurement is part of the expense process for all types of companies, but goods and services companies account for revenues and costs differently. As such, accounting for procured goods will also differ from accounting for procured services.

Companies focused on goods will need to deal with the procurement of those goods as inventory. These companies place a lot of importance in this area on supply chain management. Service-based companies provide services as their primary revenue generator so they do not necessarily rely as heavily on a supply chain for inventory although they may need to purchase goods for technology-based services.