The business landscape has grown increasingly complex and the essence of intelligent spend management, or the “why,” is exemplified. It’s imperative to look deeper into our priorities, for when everything holds equal importance, nothing truly stands out. The crux lies in effective prioritisation.
Business leaders seek continuous enhancement in their operations to keep up with the rapid evolution of the market. Striking a delicate balance between investing in growth and controlling expenditures is crucial as they navigate the challenges posed by a fast-paced digital world. Notably, the following strategic priorities are commonly associated with sourcing and procurement – the “what”.
Cash is King
The adage “Cash Is King” holds more significance than ever before. To thrive, organisations must place a heightened emphasis on managing their cash flow requirements. This entails crafting an adaptable response strategy to navigate through diverse stress test scenarios. Another crucial aspect involves the conversion of fixed costs into variable ones wherever feasible, thereby increasing flexibility in cost management. Additionally, the implementation of intelligent auditing processes for both payables and receivable transactions can uncover hidden efficiencies and cost-saving opportunities. To cap it all, optimising the total cost of ownership across various assets is essential for long-term financial health.
Organisations that regularly conduct comprehensive cost and financial analyses to monitor expenses tied to their assets can achieve a substantial 20% reduction in Annual Service and Maintenance Costs as a percentage of revenue. This strategic approach not only bolsters financial stability but also positions businesses for sustained success in an ever-evolving economic landscape.
Collaboration and Automation
Enhancing collaboration and automating processes are pivotal in supply chain management. Planning collaborative efforts is essential for gaining a clearer view of the available supply. Real-time collaboration with both internal and external supply chains is imperative to ensure seamless operations. Moreover, streamlining processes like invoice handling and error rectification, traditionally labour-intensive, is crucial for efficiency.
Organisations employing periodic database automation experience a 27% reduction in Business Intelligence (BI) report failures. This signifies that when routine database maintenance tasks are executed without human intervention, it leads to significantly smoother operations. This statistic underscores the significance of automation in ensuring a robust and error-free supply chain. Collaborative planning and automation together contribute to a streamlined and efficient supply chain ecosystem, benefiting both businesses and their partners.
Sustainability
Companies prioritising sustainability and purpose are reaping significant benefits. These purpose-driven brands are perceived as having higher value, leading to increased customer loyalty and greater employee engagement. Moreover, institutional investors are now placing greater emphasis on sustainability and purpose when making investment decisions. This paradigm shift is pushing organisations to set goals centred around utilising suppliers that are both sustainable and diverse. A notable example comes from SAP performance benchmarks, revealing an impressive 82% reduction in the number of fatalities per 100 million exposure hours for organisations that have centralised EH&S systems. These systems comprehensively track crucial information, including how suppliers manage dangerous goods and hazardous materials. This underscores the critical role technology and conscious business practices play in creating safer and more sustainable environments for all stakeholders involved.
Cybersecurity
The advent of virtual procurement through digital means has ushered in a new realm of potential threats to information security. It becomes imperative to conduct thorough audits of supplier cyber security capabilities, assessing the level of risk they may pose. This evaluation is crucial in safeguarding sensitive information, ensuring data protection, and upholding privacy standards.
A staggering statistic reveals that approximately 4 in 10 procurement executives encounter digital security breaches when engaging with contingent workers and service providers, with these incidents occurring “sometimes, frequently or nearly every engagement.” This insight is drawn from the Agile Procurement Insights Research conducted by SAP in collaboration with Oxford Economics, underscoring the pressing need for vigilant measures in the realm of procurement to fortify the integrity of digital transactions and protect invaluable information.
Future-ready operating models
The future-ready operating model is characterised by the widespread integration of digital tools, such as digital signatures, which significantly reduce sourcing cycle times. This transformation is complemented by the application of agile techniques, exemplified by the formation of cross-functional “scrum” teams focused on maximising value within specific spend categories. Notably, the profile of procurement teams is undergoing a significant shift, with roles like data engineers and data scientists becoming commonplace, reflecting the increasing importance of data-driven decision-making in procurement processes.
A striking revelation from studies has shown a mere 58% of workforce expenditure is allocated to employees, while the remaining 42% is directed towards external labour, emphasising the evolving nature of workforce dynamics in today’s agile procurement landscape.
While managing spending is crucial, the key lies in managing spending “intelligently,” as it can make a significant difference in achieving desired outcomes. Which procurement approaches do you plan to employ predominantly to drive value in the upcoming 12 months?
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