How an effective Procurement Strategy can deliver real business value

GRA Director Craig Millis talks with GRA Director Dan Knox about Procurement Strategy

In the interview Craig answers the following questions:

00:19 What are the main challenges in Procurement today?
00:47 How does procurement go about delivering savings?
01:37 How does Procurement deliver real value to an organisation?
03:40 How can Procurement strategy help organisations address social and environmental issues?
03:59 Modern Slavery Act 2018

Procurement Strategy explains how an organisation seeks to optimise external spend, procurement costs and other value contributions in a way that is aligned with corporate objectives.

Many companies lack a formal enterprise-wide strategy for how value is to be achieved through the procurement of goods and services. Consequently, it is very difficult to know if the procurement organisation is contributing to corporate objectives and how that contribution can be measured.

A clearly articulated procurement strategy will demonstrate alignment with corporate strategy and objectives on topics including process/cost efficiency, spend reduction, product innovation, global/local sourcing and corporate and social responsibility (e.g., ethical supply chain).

GRA works with clients to develop effective procurement strategy to:

Understand the current state of procurement across the enterprise
• What value does Procurement add?
• How efficient and effective is Procurement?
Identify key objectives for Procurement strategies, aligned to corporate objectives
Define the target state for the procurement operating model
• Organisation structure, accountabilities & decision rights
• Culture, people and capabilities
• Category management framework
• Operational and governance processes / controls
• Performance management framework
• Requirements for IT-enablement
Define measurable performance targets that will demonstrate progress towards key objectives
Define an actionable implementation plan

More information on GRA's Procurement Strategy Offering - http://www.gra.net.au/what-we-do/cons...

Selected transcription

Dan Knox: I'd like to chat to you today about all things procurement. What are the main challenges you see happening in procurement today?

Craig Millis: Well, Dan, I think there's an unprecedented level of expectation on procurement as a function in corporate and government today. There's always been the traditional role for procurement, which is around trying to achieve savings on the addressable spend, but there's an emerging role for procurement and an emerging expectation on procurement to deliver corporate, social, and environmental outcomes.

Dan Knox: You mentioned before that procurement's getting more involved in more than just savings, it's about social and environmental issues, how can procurement help the organisation deliver against those objectives?

Craig Millis: To play its role, procurement needs to ensure tight alignment with the enterprise's corporate and social responsibility goals.

More and more we're seeing enterprise procurement policies and strategies embodying key elements of those objectives, and that's procurement's role, is to exercise that to deliver those objectives.

Recent legislation in Australia has increased the focus dramatically on some of the social outcomes, particularly the Modern Slavery Act 2018, has really elevated the focus and attention enterprises need to give to ensuring that there is no evidence of slavery through the supply chain. From the end of the next financial year, any enterprise with revenue over 100 million dollars will have to report on the actions that they're taking to eradicate or avoid any evidence of slavery in their supply chain.

Of course, this is not new. The UN sustainable development goals have been around since 2015, and many companies have embodied elements of those goals into their corporate social responsibility charter.

Procurement has a role to reflect those objectives into their own procurement policies and strategies, and through exercising that can address many aspects of poverty and other social disadvantage through leveraging their spend to better outcomes.