What are Procurement Value Levers? Definition
When it comes to procurement, there are a lot of moving parts. You have to source the right materials, at the right price, from the right supplier. And you have to do it in a way that meets your company’s quality standards. But what if I told you there was a way to make the process simpler? A way to optimize your procurement strategy and get the most value for your spend? Enter: procurement value levers. In this blog post, we will define what procurement value levers are and explore how you can use them to improve your own procurement strategy.
What are Procurement Value Levers?
Procurement value levers are tools that can be used to increase the value that a company derives from its procurement function. The most common procurement value levers are cost reduction, quality improvement, and lead time reduction.
Cost reduction is perhaps the most obvious way that procurement can add value to a company. By negotiating better terms with suppliers, procuring lower-cost materials, and streamlining the process of purchasing goods and services, procurement can save the company money.
Quality improvement is another important way that procurement can add value. By working with suppliers to improve product quality and by ensuring that purchased products meet the company’s specifications, procurement can help to improve the overall quality of the company’s products and services.
Lead time reduction is another key area where procurement can add value. By working with suppliers to reduce lead times and by streamlining the process of ordering and receiving goods, procurement can help to reduce inventory levels and improve customer service.
How can Procurement Value Levers be used?
There are four primary procurement value levers that organizations can use to improve their overall performance:
1. Cost reduction: This is the most obvious way that procurement can create value for an organization. By negotiating better prices with suppliers, or finding more cost-effective sources of supplies, procurement can save the organization money.
2. Risk management: Procurement can also help to mitigate risks associated with the acquisition of goods and services. By carefully vetting suppliers and contracts, procurement can help to avoid potential problems down the road.
3. Process improvement: One of the ways that procurement can create value is by streamlining and improving the process by which goods and services are procured. By making the process more efficient, organizations can save time and money.
4. Knowledge management: Finally, procurement can contribute to an organization’s knowledge base by keeping up-to-date on market trends, supplier capabilities, and new technologies. This knowledge can be used to make better decisions about future procurements, and ultimately save the organization time and money.
What are the benefits of using Procurement Value Levers?
Procurement value levers are methods or tools that can be used to improve the value of the procurement process. These levers can be used to improve quality, reduce cost, or improve delivery. By using these levers, companies can improve their bottom line and become more efficient.
– Negotiation: This is one of the most common levers used in procurement. When negotiating with suppliers, companies can aim to get better prices on products and services. In addition, negotiation can also be used to improve terms and conditions, such as payment terms or delivery schedules.
– Bidding: Bidding is another common lever used in procurement. By running a competitive bidding process, companies can ensure that they are getting the best possible price for the goods and services they need.
– Supplier selection: Carefully selecting suppliers is another way to add value in procurement. By working with reliable and reputable suppliers, companies can avoid problems down the road. In addition, by selecting suppliers who offer competitive prices, companies can save money on their purchases.
Are there any risks associated with using Procurement Value Levers?
1. Not all suppliers will be receptive to the concept. Some may see it as a way for theprocuring organization to get more out of the relationship than they are willing to give.
2. There is always the potential for miscommunication or misunderstanding when trying toleverage value from suppliers. This could lead to tension or even conflict in the relationship.
3. If not managed properly, too much focus on cost savings can jeopardize other importantaspects of the procurement process, such as quality or delivery time.
4. Finally, some organizations may find it difficult to sustain the implementation of ProcurementValue Levers over the long term if they do not have adequate resources in place.
There are many ways to increase the value of your procurement efforts, and procuring managers should be aware of all the levers at their disposal. The most important thing is to always be thinking about how you can improve the value of your procurement function, and to never settle for the status quo. With a little creativity and effort, you can make a big impact on your organization’s bottom line.