For many businesses, global procurement is about driving down costs across the supply chain. Businesses that adopt a global procurement mindset look for ways to streamline purchasing of materials, technologies, and resources, as well as negotiate more competitive deals and financial arrangements. But increasingly, global procurement is being seen as an unprecedented opportunity to strengthen working relationships across different divisions of the company and apply this collective wisdom to drive performance and sales.
With so much riding on global procurement, businesses today need a long-term strategy to ensure everyone who plays a role in the supply chain will be on the same page. This task can seem daunting, particularly for complex, multinational organizations where different divisions and teams may inherently distrust others and/or where dominant personalities can make purchasing decisions that are arbitrary and counterproductive. A comprehensive global procurement strategy is essential to combatting these potential pitfalls and undoing any damage that’s already been done. Let’s review the six essential elements of a winning global procurement strategy:
- Decisions should be made in a systematic manner that leaves politics out: The most effective global procurement strategy is one that guards against allowing procurement decisions to be influenced by personal beliefs and emotions, internal company politics, and fiefdom-type self-interests. Thus, criteria should be developed for all decision-making processes. For example, a proposed change should be shared widely with all teams and divisions, and input should be actively solicited; then, a review team should actively compile and synthesize the feedback. Meanwhile, on the back end, decisions should be made transparently, with clear documentation and justification to encourage widespread buy-in.
- Emphasis should be placed on articulating responsibilities, not hierarchy: As business leaders are developing a global procurement strategy, they tend to focus on how individual people fit into the procurement hierarchy. This emphasis on organizational structure is logical and instinctive, but it unfortunately has a limited effect in terms of promoting efficiencies and streamlining purchasing operations. That’s because the implicit assumption when creating hierarchies is that the individuals who populate them will know what to do. The reality, however, is that these individuals can only work cohesively if they all are on the same page about what their responsibilities are and how they fit into the larger decision-making framework.
- Procurement processes should be calibrated for the local, regional, and global levels: One of the easiest things to do when designing procurement processes is to not think about how they will actually play out across all levels of the purchasing infrastructure. Just because a process works optimally at the global level does not mean that every local supply market is run the same way, or that every regional team will have enough flexibility and/or oversight to be able to carry out its mandates. Thus, any processes or frameworks that are designed should be vetted at a minimum of three levels: local, regional, and global.
- Targeted professional development opportunities should be created: As much as global procurement can run smoothly in theory, it takes real people to make it work in practice. And as individual employees are hired, promoted, and replaced, there should be programs in place to ensure they’re getting the professional development opportunities they need to grow and succeed.
- Cost savings should be tracked clearly and compellingly: For individual procurement teams and employees to see the value of working concertedly and in unison, they need to see results. Thus, businesses should design mechanisms to track cost savings on an ongoing basis and report on the results in a clear, compelling manner. When employees are convinced they’re making a difference for the bottom line, they’re more likely to buy into the global procurement strategy and work hard to achieve global cost-savings goals.
- Emphasis should be put on building and strengthening relationships: Cost savings is the number one goal of global procurement; but also important when developing a procurement strategy is implementing processes and practices that strengthen ties with suppliers and increase internal cooperation. Relationship-building is essential in any line of work; for global procurement, it means opportunities to identify additional efficiencies.
A successful global procurement strategy can drive process improvement, technology enablement, and improved information management. The keys to creating this winning strategy are to promote systematic decision-making, articulate responsibilities instead of hierarchy, calibrate processes across multiple levels, create professional development opportunities, track cost savings, and focus on relationship-building.