The Future of Procurement Entails a Different Approach

The fundamental way of increasing profits is to cut spending down to the bare minimum across both the supply
chain and the manufacturing process. But before materials can enter the supply chain and be turned into the
products that represent a company’s main source of revenue, there has to be a procurement process.
Managers are starting to look at how future procurement processes can be changed to help fulfill the overriding,
cost-reduction approach to business.
Currently, the buying of goods and materials is looked at as independently transactional. The procurement officer
can only hope to get the best price for the materials or products offered at the moment because of various
market factors affecting the individual orders they place. The procurement process is not thought about
strategically as a cost-reduction exercise.

Re-Evaluation of the Procurement Process

But the procurement process is an integral part of a company’s operations and consumes a significant portion of
the company’s financial resources. Why shouldn’t it be considered as a cost-reduction candidate along with all the
other processes of manufacturing? Managers and owners are starting to consider a different approach to take in
future procurement processes. This approach is called Strategic Sourcing.
In the strategic sourcing approach, a procurement officer creates relationships with their suppliers to reduce cost
in the various categories the supplier provides to create a sustainable advantage over the competition. By
addressing the total cost of multiple orders with one supplier instead of looking at them all as individual orders,
the procurement officer can leverage the continual relationship with the suppliers to address many factors. They
consider the quality of the materials and products, work with them to lower the per-unit cost of items ordered,
and improve the procurement process’s technology, which saves money for both the supplier and the
manufacturer.

Developing Supplier Relationships

The success of this future procurement process depends on the ability of the procurement officer to develop
mutually beneficial relationships with their suppliers to achieve a reduction in the costs of materials across the

board. Obviously, the greater the number of materials a single supplier provides to a manufacturer, the better its
chances in implementing this future procurement, strategic sourcing approach. Both the supplier and
manufacturer have to recognize the importance of the relationship to make the strategic sourcing work to fulfill
all its goals.

Taking a Value-Added Approach to Future Procurement

By taking this cost-reduction approach across all departments of a company, top managers are finding that when
they focus on the different processes and facets of procurement, they find a lot of areas that may offer cost-
savings and added value to the future of procurement.
By looking at procurement from the perspective of an added value opportunity, a savvy and experienced
procurement officer can soon think of additional ways to add to this value-added proposition. They may work
with the supplier to find less expensive options in shipping, ordering in greater amounts to take advantage of
volume discounts or package the shipments differently to create savings from their efforts, rather than from the
materials themselves. The procurement officer may also look at improving and streamlining the production
process by bundling the delivery of materials together to improve workflow.

Company-Oriented Way of Thinking

By expanding their way of thinking to encompass the needs of the company’s bottom line instead of getting the
best price on an individual order, the procurement officer starts to take a strategic sourcing approach to the
procurement process.
By adopting the concept of strategic sourcing, every department in an organization can benefit. The procurement
officer will start considering the entire production process before they place their orders. They will organically
improve the structural capabilities of the company by considering more than the value of the materials
themselves. This alternative way of thinking will encourage incremental revenue growth as a by-product of the
procurement process.
Strategic sourcing supports the value-added, company-oriented way of thinking that fulfills the goals of being all-
encompassing, collaborative, and commercial. It’s both holistic in its approach and more beneficial to the
company.

Pantavanij Helps You Prioritize Your Procurement Process

Pantavanij has digital purchasing system software that helps you streamline the procurement process. It
automates many of the steps of purchasing and enables you to focus on developing a strategic sourcing mindset.
You’ll be able to more efficiently convert your procurement processes into a system that will provide many more
measurable benefits to your company and lead to embracing the future of procurement.