Designing the right global procurement strategy for you and your project
It is quite challenging in the initial phase of any kind of large-scale project, especially for those tasked with guiding the project to completion. The outset of your business is very crucial time; as any project owner needs to make important strategic decisions. It is necessary that the operating model of a procurement function should be consistent with a company’s overall strategy, culture, and global organization.
Usually, it is hard to balance internal and external pressures, as the target is often moving one. Actually, procurement functions should be adapted. It is always best to do it frequently than the rest of the company because they are impacted by changes that include- changing supplier panels, disruptive supplier innovations, new corporate strategy, evolving manufacturing footprints, and higher savings objectives, all of them require increased flexibility.
Key factors in creating procurement operating model:
Basically, there are three key structural dimensions, which drive the thinking on procurement designing procurement operating model, namely-
- Supplier market
- User needs
Each of them plays a vital role in shaping the operating model differently.
For instance, if owners are asked about their expectation for their infrastructure project, they will want a project which is built on time, budget, and in accordance with excellent operational specifications. A fast project delivery can adversely impact on cost and quality of work. The cost of the project itself is incredibly sensitive to specification levels and timing. Hence in actuality, savvy owners identify the tension between such related goals, establishing their priorities and adopting a procurement strategy, which best serves those priorities.
The procurement models that are available are informed to the traders/producers through such client alerts. Also, they are being given the knowledge to help them make an informed decision about which course of action is best for their infrastructure project.
Elements to be considered while designing procurement structure:
The four significant elements that must be considered while designing the procurement’s organizational structure are as follows:
- The company’s defined strategy, along with the organizational structure for the expected five years.
- The functional strategies defined by the rest of the business.
- The defined strategies must be aligned with the overall strategy.
- The resources and maturity the procurement company has.
Any activity of a company must make sure its strategy synchronizes with that of the wider company.
It is utmost important that the procurement must recognize whether the firm would benefit from both, a centralized structure and decentralized structure.
- Centralized structure- to place decision-making at the core of the business.
- Decentralized structure- to empower every business units and regions in decision making about products and services.
Unilever is one of the best examples. It has made complex networks between its headquarters and its subsidiaries due to the market strategy it follows. The company work in a manner: though the consumer goods group has brands worldwide, it customizes some of them because of local preferences and requirements. This situation needs careful coordination and collaboration between its business units and worldwide center.
As a second consideration, procurement must be aware of diverse functional strategies around the business. Perhaps mirror their structures, in case it gives a better position to engage with stakeholders. Undergoing the same structure might bring extra advantage for its clients and improve engagement with them.
Ultimately, procurement will be able to recognize the abilities its team has and identify which extra capabilities its people need to master. As a result, it can achieve the compliance of the objectives and the delivery of the advantages stakeholders ask for.