Success Factors for Professional Purchasing
Martin Berr-Sorokin
in Procurement Technology, Strategic Sourcing
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3 Comments
High performance purchasing with long-term strategic orientation is a key factor for successful international competition. Therefore, purchasing is one of the most important issues in a company – material costs are the largest cost block in an industrial company. Due to this situation, efficient cooperation with suppliers is becoming increasingly important.
An important success factor for professional purchasing is achieving transparency, especially regarding company-wide purchasing activities, purchasing volumes, frame contracts as well as detailed information about current and potential suppliers. A company can attain this comprehensive view through integrated supplier qualification, contract management and spend analysis.
An active and targeted supplier management is the prerequisite for strategic purchasing. Cross-functional supplier rating identifies supplier strengths and weaknesses. Suppliers are categorized according to their performance and strategic significance based on a substantiated and objective supplier classification. This is the basis for targeted and structured supplier development including measures controlling. During this process, supplier goals are set, deadlines and responsibilities defined, sustainable optimization measures implemented and development progress monitored.
Experience indicates that the individual components must interact with each other in order to provide consistent process support and that maximum benefit can only be achieved through the consolidation of the corresponding information obtained.
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Reader Comments (3)
In 2000, BAE Systems joined other aerospace and defense companies to found the online trading exchange Exostar.
Yet the company found that 99 percent of its purchase orders and invoices were still being processed manually.
The persistence of paper was the result of a series of mergers and acquisitions that left the company saddled with a large number of disparate ERP procurement systems.
BAE Systems could not reap the full financial benefits of e-commerce unless its 32 different ERP procurement systems could be connected to Exostar.
It is with a target process of supplier interactions and workshops we achieved an acceptance of the importance of working together with our suppliers through ecommerce. The benefits for the suppliers was being paid within the terms of the contract.
Once this was achieved, some 6 years on, we are now reaping the benefits of the supplier information systems and development of a supplier relationship management philosophy which is important not just to BAE Systems, but across the Aerospace and Defence sector.
Leading UK Aerospace and Defence companies unveiled a national industry plan, "Action Plan for 21st Century Supply Chains" at the Farnborough International Airshow to increase productivity and competitiveness within the aerospace supply chain. Its aims are to:
(1) modernise business relationships
(2) inspire a greater entrepreneurial spirit
(3) deliver competitive customer solutions to sustain profitable business growth
Clearly in this sector we have to be clear on the benefits of categorisation and as such we have been successful in driving out benefits of £275m in third year of implementation.