Within every B2B structure, procurement is far more than just a business necessity. It's a strategic function that holds much sway on the performance, profitability, and competitiveness of both buyers and suppliers.
As someone who's been deeply involved in the procurement landscape, I've resonated with several key aspects that underline its importance. In this blog, I share five of these, coalescing my insights with real-world examples. I also go beyond these to encompass some additional elements that make procurement indispensable in B2B operations.
Procurement as a Tool for Cost Reduction and Savings Maximization
Through its ability to source goods and services from suitable and cost-effective suppliers, procurement has proven its worth in achieving these timeless business objectives.
An informative study by the Aberdeen Group throwing more light on this: top-run procurement organizations, it says, can save as much as 12% on their capital spend, amounting to thrice the savings of their average counterparts (Aberdeen Group, 2014).
Procurement: The Stimulus for Innovation and Value Creation
This concept is exemplified by a case study by the Chartered Institute of Procurement and Supply (CIPS) showcasing Rolls-Royce's partnership with its suppliers. Their collective procurement strategies co-created value, leading to improved engine performance, reduced emissions and, consequently, increased customer satisfaction (CIPS, 2016).
Mitigating Risk through Proactive Procurement Strategies
The World Economic Forum (WEF) has emphasized the role procurement can play, citing how it helps address the complex risks and challenges prevalent in global supply chains. These risks include widely-discussed environmental, social, and governance issues, cyber threats, and geopolitical uncertainties (WEF, 2020).
Fostering Long-Term Relationships and Trust: A Key Procurement Function
The Institute for Supply Management (ISM) survey substantiates this, indicating that 83% of procurement professionals consider supplier relationship management (SRM) a strategic priority, attributing positive outcomes such as increased efficiency, quality, and product innovation to effective SRM implementation (ISM, 2017).
Procurement’s Role in Supporting Sustainability and Social Responsibility
I believe that businesses can make a significant societal and environmental impact by integrating their procurement functions with sustainable practices and social responsibility initiatives.
This is further backed by an International Trade Centre (ITC) study showing that over 90% of consumers prefer companies that take their social and environmental responsibilities seriously (ITC, 2019).
It's clear that far from being a mere business necessity, procurement has power and purpose. The potential to influence change is not just a reason for businesses to align their procurement strategies with sustainability and social justice, but a compelling cause for all of us in this industry to commit passionately to what we do. It's a fight worth fighting and an endeavor worth every ounce of our efforts.
Beyond these reasons, procurement further uplifts B2B transactions by granting diversity, inclusion, and fostering digital transformation and data-driven decision making. It also aligns with the strategic goals and priorities of organizations, acting as a catalyst for growth and competitiveness.
To conclude, procurement's role extends far beyond conventional business operations, impacting performance, profitability, and competitiveness. Moreover, well-executed procurement strategies have the potential to contribute positively to society and the environment.
Considering these insights, any modern B2B environment must acknowledge procurement’s potential and realign its strategies to unlock further value. It is more than a process - procurement can be a game-changer in business-to-business transactions.
Have a wonderful day, I hope you find this useful, and if you have any thoughts about it, please don't hesitate to share in the comment section.
Lars
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