Procurement is one of the most important end-to-end business processes in an organization. Procure-to-pay and Source-to-pay are terms that are commonly used to describe the overall procurement process. Our experience with direct and indirect procurement suggests that there are several other related processes in Engineering, Manufacturing, Supply Chain and Finance that connect with and lead to core Procurement processes. The figure below highlights several workflows and assessments that support direct and indirect procurement in an organization. We highlighted some of the workflows because of their central nature to Procurement Excellence.
New Supplier Evaluation, Selection and Onboarding
Engineering, manufacturing and operations teams often need to bring in new suppliers for components/parts, capital equipment, production services, MRO supplies and other products/services. This is usually the start of the first stage of procurement process. New Supplier Evaluation, Selection, Contracting, and Onboarding is a key process that needs to be done efficiently and effectively to support Business needs of other functions within the organization.
Request for (Information/Quote/Proposal) workflows can be part of new supplier evaluation/selection process as well as processes for getting information/quotes/proposals from existing suppliers. Our experience suggests that there is considerable need for flexibility as well as cross-functional engagement internally and with potential and existing suppliers to properly support RFI/RFQ/RFP workflows
The job of Procurement teams does not end with onboarding a new supplier. For a variety of direct and indirect procurement needs cross-functional teams need to work together to make sure Suppliers are ready to do the work at the level of performance needed.
Many industries have adopted a number of standards/processes (Production Part Approval Process – PPAP..) that can be used to ensure Supplier Readiness.
Democratizing Purchase Requisition Process
Purchase requisition is a process that everyone in the organization can use to initiate to request purchase of goods/services. The more employees an organization has, the more the need for a streamlined purchase requisition process (with appropriate budget allocation/checks, review, approvals..) to simplify and reduce the load on Procurement teams.
Purchase Order Collaboration
Once a purchase order is issued to a supplier there is no guarantee that the Supplier will be able to meet the expectations on the dates as well as schedule of deliveries. This is especially an issue in the current supply chain environment. Several downstream processes related to manufacturing planning (MRP), fulfillment operations rely on the status of purchase order, changes suggested by suppliers and related fulfillment activities. We believe purchase order collaboration with Suppliers is one of the most important workflows that should be streamlined and made collaborative.
A PO collaboration process that allows suppliers to commit, change or suggest changes, internal stakeholders to collaborate with suppliers, and allows downstream processes (MRP, Fulfillment planning) to quickly respond to PO changes will improve supply chain visibility as well as resiliency.
The reason invoice verification is often an important aspect of Procurement Excellence is due to the fact that it is the process that leads to Supplier payment. Invoice processing is often done by teams that are not necessarily well informed of the goods/services that are purchased, delivered and being billed. As a workflow that touches all the key stakeholders and leads to payment, a simple, streamlined, and collaborative approach that ensures that the purchased items are delivered and the correct amount is being paid in an efficient manner is essential for Procurement Excellence and good relationship with Suppliers.
Supplier Performance Reporting and Assessment
Many leading organizations incorporate supplier improvement as an element of continuous improvement program focused on the supply chain. Supplier improvement is often dependent of periodic supplier performance assessment. A streamlined and efficient workflow that provides periodic (monthly) performance reports to suppliers will help suppliers and internal stakeholders focus on areas of improvement.