In this fifth and final part, we will delve upon Value realization through non-sourcing activities being a critical objective for Procurement Professionals in 2014. You can read the previous parts of this blog series, that discusses about Improving Profits(part 1), Improving Visibility(part 2), Addressing Strategic Sourcing as a key capability related issue(part 3) and Benefits of eSourcing(part 4).
The results of the survey also revealed that around 43% of procurement value arises from non-sourcing activities. These activities largely consist of Supplier Relationship Management, Contract Management and Spend Analysis.
Supplier Management can help companies have better visibility into supplier deliverable and offer benefits to remove hidden cost drivers, increase competitive advantage by reducing cycle times, induce charge-backs for non-conforming material, gain insight to best leverage the supply base, and streamline processes.
The survey results also revealed, 60.2 % of procurement professionals have disclosed that a formal scoring methodology either does not exist or is extended and maintained only for a select few strategic suppliers.
A formal scoring methodology for suppliers helps the organization to understand the strengths and weaknesses of their suppliers. Supplier performance management can help companies have better visibility into supplier deliverable. Scorecards can also help companies to develop their suppliers and help them overcome their weaknesses which would help both the companies and the suppliers. Organizations can leverage supplier management programs which wuill help in setting up key performance indicators, capture data inputs, set stakeholder surveys and manage supplier scorecards
Benefit of using a Scoring Methodology for Supplier Performance Management:
- Develop Strategic Relationships:
Based on the scorecards, organizations may choose to benchmark suppliers with their peers in the industry, execute supplier development programs which can help the organization to improve supplier performance, product/service quality, reduce cost and attain higher value from the suppliers. Procurement can thus leverage and enhance strategic supplier relationships and also help reduce business risks.
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