When it comes to Sourcing and Procurement, most of the organisations want to reduce cost while maximising the value from the supplier because of the rapidly evolving technology and opportunity to introduce new operating models, which were not feasible a decade ago. While this overarching thought addresses the “why” in terms of business strategy, Organisations are not clear when they get down to the details – the hows and whats.
From our years of experience in advising clients on Procurement Strategy, we believe that organisations and suppliers need to understand the purchasing order and sourcing cycle to create value to the end customer.
Without a clear understanding of these cycles, Organisation and its supplier can work mutually to develop a Procurement strategy to create value for its customer. By doing so, not only can they remove unwanted cost but also increase the size of their markets. However, the key question is whether sourcing and supplier organisation are willing to be transparent and if so, how much?
Obviously, transparency comes at a premium. Therefore, we typically advise our clients to segregate its sourcing strategy based on the nature of spend and the appetite for risk or exposure. Typically, our consultant teams have worked with the business and relevant teams to understand the purchasing and sourcing portfolio to clearly develop a strategy that caters to the different segment.
- Benefits of Segmented Strategy: Supplier’s perspective
- Nurture client and seek new opportunities
- Defend rigorously and provide high level of service
- Charge premium price for value-added service
- Benefits of Segmented Strategy: Buyer’s perspective
- Develop performance-based partnership
- Encourage competitive bidding
- Improved bargaining power for negotiation