Top 4 things that I will DO in Q4 to create a HIGH IMPACT in Procurement organization:
1) Costs Management:
Are you able to rejig your costing models to leverage the current situation?
A) Falling commodity prices:
- Aluminum is down by 30% YoY, Zinc by 22%, Copper by 27%
- Steel by 33%
B) Rising Energy prices:
Recent decision by OPEC to cut Oil product, could be the catalyst to accelerate the recession apprehension. But, I think we are scheduled to see Crude back at 110+ levels by Q3-2023.
C) Falling Shipping/Freight costs:
At the moment, Shipping lines are recording lowest demand for containers from their customers. Falling prices are also a good indicator for that. However, due to Crude oil scenario, we might see increase in shipping costs.
D) Currency Devaluations:
The trend will continue as the world will look USD or Gold as base option. EUR, GBP will further deteriorate by 6-8% by Q3.
2) Risk Management:
Can you perform risk assessment of your suppliers likely to be impacted the most by slowdown of your demand orders. Identify your bottlenecks now! Time to re-evaluate your critical single source suppliers.
3) Working Capital and Inventory Optimization:
A) Working Capital and Inventory Optimization: Rejig your payment terms with Strategic suppliers. Also, create a global common pool for your critical spares, so that you do not have to maintain separate inventory for each of your manufacturing location.
2022 and 2023 is not the time to explore Just In Time inventory models. Security of Supply will continue to take precedence over the same. However, I am still positive about Vendor Managed Inventory provided the warehouse location is not too far from your manufacturing site.
4) Rejig the Processes:
I can not stress enough on this. Your process should enable to you decide fast and adapt in case of any deviations.
It is 2022 and if your processes and governance can not help you move in days or maximum few weeks on critical matters, then you can not become effective in this economic environment.
If I were to lead and setup my Centre of Excellence in 2022, following would be my key target baselines
A) Transactional/Tactical Sourcing:
a.) 90% automated - self service through pre-negotiated catalogues. No involvement of Procurement except for catalogue utilization and price refresh
b.) Non Catalogue Purchases : 3 days turnaround time. Automated negotiation by Bot and final review by Buyer
B) Strategic Sourcing:
Define the level of complexity.
Simple to Medium : Turnaround time should be 2-3 weeks
High Complexity : Turnaround time should be 4 - 10 weeks (this is where senior leadership gets involved)
C) Vendor Onboarding with all due diligence checks : 6 HRS to 1 Day
D) Identification of Cost Saving Opportunities by Spend Analysis: 2 Hours
E) Identification of Process Non compliances: Automated and realtime. Reviews done only on exceptions or outliers
F) Cost Models : 50% fixed and 50% market linked
I'll add more on my next post
Comentarios