Authors at Supply Chain Management report that for many categories, securing latest technology can contribute more to profitability than buying at a low purchase price.
Original article: http://www.scmr.com/article/measuring_procurement_effectiveness_across_unequal_spend
SCM reports that it is the responsibility of modern procurement functions to drive value beyond unit price savings.
The authors assert that Chief Procurement Officers may find it difficult to measure the performance of procurement professionals who deliver these sources of value.
Attracting and retaining top procurement talent is only possible if performance in these areas can be accurately measured and rewarded and the authors highlight the fact that savings potential can vary wildly among different categories, with some placing more emphasis on risk avoidance or technological advancement.
They argue that the individual performance effectiveness of category managers should be based on their ability to:
Effectively engage with business stakeholders, demonstrate category expertise and develop/deliver against value-based category strategies.
Utilising these skills will add value to the respective category area.
A buyer with detailed knowledge of the category will know where to focus for improved results.
Category managers can be measured on their ability to deliver business impact in varying ways. A category strategy is dependent on translating these value drivers into category objectives. For some categories, improving the strength of supplier relationships can translate into access to cutting edge innovation before the market. By identifying value drivers and translating them into specific business objectives, procurement professionals can create their own metrics by which they are measured.
This requires management and wider business engagement and buy-in to agree the value that they can bring to the business.
The final step in the process is to map the objectives to metrics that can be used to assess, and compare, the category manager’s performance against the goals laid out in their category strategy.
The authors make the point that many firms struggle to show the value of procurement beyond direct cost savings. Procurement leaders will be well positioned to manage their peer’s expectations if they can accurately assess the effectiveness of individual category managers. A strong procurement team can increase visibility and influence within the organisation.
Read the full article here.
Comments