The relationship between finance and procurement is critical. Yet tension between the two teams still plagues many organizations – and as procurement’s role in the executive suite grows, tensions may boil over.
At the heart of the issue: today’s procurement teams are tasked with more bottom-line responsibilities than ever. In a perfect world, CPOs( Chief procurement officer) and CFOs collaborate to deliver value, but the corporate world is rarely perfect. Here, we set out to uncover the root causes for why CPOs and CFOs often butt heads and discuss how procurement teams can proactively address these friction points to create a strong, trusting relationship with the finance department – and more enterprise value.
What do your procurement people get paid to do? It’s the sort of question that often prompts Procurement Head’s to quote back their team’s job descriptions. So far so good, at least to the extent that the job description has kept pace with reality and the demands of the business.
Spend Management is a vital element of Supply Chain Sustenance and Effectiveness. The management of spend in an organization falls under the Mandate of its Finance and Procurement Functions.
To elaborate, the mandate of the Procurement Function is threefold:
- Management of Spending
- Supporting of Operations
- Protection of the organization from Risk
One Key Performance Indicator of the Procurement Function is the Total Cost of Ownership (TCO). TCO is calculated by adding the contracted price of a product or service to cost incurred by the supplier creation of delays, defects, rework and non-value add steps. Supplier generated delays, causes of rework, shipment of defects, force non-value-added work are major sources of procurement risks.
RFP’s should be crafted for maximum response from qualified suppliers. They shouldn’t be written in a way that scares off suppliers who could create value for your organization. Suppliers have limited time, too, ya know!
Therefore, it is key to make sure that all questions in your RFP’s are relevant, appropriately timed and necessary. As such, use this RFP proofreading checklist to determine if each question in your RFP should stay, be changed or be deleted.
Capital expenditure has always been on the high priority list of every CFO agenda. Globally, the attitude towards capital spending is also taking a leap. The investment decisions regarding CapEx are critical not only because of the size of spend, but also from the point of view of an organization’s strategic goals. It has been observed that most of the time policies or the assumptions for CapEx budgeting and CapEx approval are not very clear in an organization. This article should help better an understanding of industry best practices for capital expenditure planning and considerations behind CapEx polices.
Risk is an inherent factor in supply chains. Organisations that do business with other groups inevitably take on an element of uncertainty that can reflect on a brand – where do sourced products come from? Who’s making it? What are the financial, geopolitical, and legal risks associated with a vendor? After all, consumers don’t differentiate between an element of a product and a product’s brand.
Above is Pictorial re-presentation of Novation Process:
INTRODUCTION: Doing Business is very challenging, Clients / Owners are finding all best ways to minimize their Cost and Schedule of building Energy Sector Plants. Novation of Contracts / Purchase Order to EPC Contractor is one of the best techniques in Energy Sector to reduce cost and minimize schedule risk.Read More »
Procurement teams deal with huge volumes of complex data, which create a considerable administrative burden for the function and take up vast amounts of procurement professionals’ time. The function is among those that stand to benefit most from artificial intelligence (AI), yet it is often the poor relation of innovation – missing out on investments in technology made elsewhere in the business.
Knowledge management is becoming critical for organisations as the current generation retires. So how can procurement leverage technology to ensure knowledge isn’t lost?
“Knowledge is power,” proclaimed Francis Bacon, the English philosopher whose advocacy of the scientific method fuelled the scientific revolution. Centuries later, Dale Carnegie, the American philosopher and writer, and perhaps the father of corporate training, responded, “Knowledge isn’t power, until it is applied.”
Bacon’s and Carnegie’s time may have passed – our economies and businesses are exponentially more global and complex – yet, their words still ring true.
Around 20th February 2018, fast-food chain KFC closed nearly 650 of its outlets in the UK after its new logistics partner failed to deliver the chicken its stores needed.Behind the ’chicken chaos’ headlines are some serious lessons for procurement executives, regardless of the industry or the region in which they work.