Driving Business Value through Improved Procurement Performance

Companies across industries are adjusting to volatile market conditions and reduced demand, leading executives to focus on cost reduction. The procurement and supply chain function serves as a key driver for improved cost performance, and many companies have launched initiatives focused on cost optimization. However, a narrow focus on costs can miss potentially bigger value opportunities. Leading companies are balancing other factors, such as enhancement of revenue through supplier capabilities and planning for the potential of constrained supply markets in the future.

Many companies often focus their efforts simply on strategic sourcing. This limited focus may initially reduce costs for the buyer, but it might not ensure long-term realization of those benefits. More importantly, if executed in a manner in which cost is the only focus, strategic sourcing can result in damage to a supplier relationship that may become critical in times of supply constraints.

This paper discusses how companies should adopt a more holistic lens to the supply base that aligns the needs of the internal customer with long-term supplier relationship management. This approach shifts the focus of the procurement organization to the concept of Total Value Delivered.