Overview: Procurement & Sourcing

Despite 20 years of transformation of the Procurement function and multiple initiatives to improve Procurement performance, various levers can still be activated to optimize costs and control margins

Context

In all lines of business, organizations are facing rapid and sometimes pivotal developments: volatility of commodities, quick succession of periods of growth and short supply followed by recessions, shifting areas of consumption, ever-increasing pressure from competition, emergence of low-cost products and services, and over-informed end-consumers.

These changes are placing pressure on organizations for which cost optimization and margin control have become priorities.

Challenges

Procurement performance is therefore crucial to a company's competitive performance. It presents two advantages:

  • It offers significant leverage on the operational margin: a 5% cost reduction can account for a margin benefit equivalent to 20 - 30% of revenue
  • It only has very slight internal impact on the company

Although companies have been conducting various initiatives for a number of years, there is still huge potential for progress, which would provide substantial benefits. The nature of the levers and their related challenges depend on the maturity of the company and its line of business.

How can Argon Consulting help you?

Some of the projects launched by procurement or operations managers as a priority include:

  • Procurement organization efficiency: with the aim of increasing the added value of the procurement function, in particular by reducing the Total Cost of Ownership (TCO) of products/services procured, while optimizing the cost of the function
  • Implementing procurement savings plans, including short-term levers (competitive procurement, negotiation or consumption policy), as well as medium-term ones (category-based procurement strategies)
  • Developing Global Sourcing strategies, in particular Low-Cost Country Sourcing (LCCS), for each category and geographical area
  • Optimizing indirect procurement, categories with specific levers, often managed by the business line management (IT, Marketing, Communications, etc.), with significant potential savings
  • (Re-)Design-to-cost: designing and procuring based on the customer's needs. This approach, which is based on various methods and applications, provides substantial benefits in collaboration with the different functions involved (marketing, production, Research and Development (R&D))
  • Cooperating with strategic suppliers to sustain growth and/or create value or secure supply
  • Supplier development: to improve suppliers’ performance and skills to fulfill their own needs
  • Implementing supplier performance management systems to identify the areas for progress, improve the service obtained and sustainably reinforce collaboration
  • Optimizing procurement and supply processes, to improve the efficiency of transactions throughout the supply chain

 

Case Studies

Operational due diligence in the acquisition of a specialized retailer by an investment fund
Yes, it is still possible to save 30% on indirect procurement!
Defining a makeorbuy and sourcing strategy for all clinical development processes
Finding procurement synergies in a decentralized group
Various levers can still be activated to optimize costs and control the margin
Organizing procurement and managing new products introduction