Procurement Strategies for Business
By: Tina Samuels
Procurement strategies are an important part of growing a business.
By incorporating new strategies, a business can find their distribution channels grow, along with enjoying sizable profit margins. A downturned economy caused businesses to think about changing how their procurement procedures were handled, as the global economy improves these strategic moves in procurement have become standard practice.
Outsourcing has become a top resource for businesses around the world.
Large, well known companies have led the way with such outsourcing. For example, Boeing procured outsourced development for their new 787 Dreamliner. With small exceptions, most of the Dreamliner – development and fabrication – has been outsourced to companies like Mitsubishi and Messier-Dowty.
The use of outsourcing is most apparent in customer service industries.
Many call centers are located outside of a company's home country. This is due to the lower cost of outsourced customer service. Parts and other supplies are often imported from China, India, and other countries where labor can be found at a lower rate than in countries that have been industrialized longer. Major companies use outsourcing for more than customer service – as with Boeing and the 787 development.
Supply management is just one avenue for procurement strategy.
Many companies today work with others to develop products for consumers. Clorox and Teflon put their innovations together for surface protecting cleansers. Clorox uses many companies to help develop products or find ways to combine the unique assets of products into one new product.
While Clorox does not outsource all of the development procedures, it is a leader in procurement strategy. Supply management is no longer merely an operation function of a company. As technology moves forward, businesses must compete with the on-demand and instant gratification lifestyle such always on technology has created among consumers. Procurement in the supply management sector will lead the way as one of the most integral parts of business today.
Chain supply around the nation, or globe, will set a business ahead of others in the pack if managed properly.
Distribution centers in centralized regions will cut down on shipping time, which in turns helps feed the instant gratification craved by consumers. General demand for items to always be in stock or to be on the shelves at a certain time drives the procurement strategy efforts of all business.
One example of using chain supply to the best advantage is during the Superbowl.
A company has no way of knowing who will win, but they can be on standby with merchandise to sell after the game. A procurement strategy would be to have a chain of suppliers of different jerseys ready to deliver at a moment's notice. Even a clothing printer chain, to avoid double purchases.
Procurement organizations are one avenue for businesses to find others that can help them in their projects.
When a business needs new suppliers with fresh ideas, they can contact a procurement organization. This allows the original business to focus on their own product without spending valuable time on procurement. Procurement organizations are not focuses solely on supplies. If a business needs marketing, then the organization will seek the best marketing match.
This innovation in procurement can save thousands. Not only can the company in search of supplies or other services find their best partner, they can cut back on the resources used in office.
Full time departments for such procurement require employees, office space, energy resources, and more. Hourly wages alone can run into the thousands, while outsourcing may have a flat rate. The cost will vary according to the organization, a monthly fee or yearly fee may apply.
Other innovations in procurement may be found by bringing in agencies that can identify ways to cut costs on development or products or re-building existing products. These companies take apart a product or line of products in order to find design flaws or find new ways to build those products at a lower cost. Appliance manufacturers are major users of such innovation companies. Appliances are taken apart, piece by piece, and recommendations are given based on the investigators findings. One such company, the Henkel Group, found 14 ways to save money during refrigerator manufacturing.
Procurement strategies are more than just finding new ways to supply consumers, develop products, and innovate. Strategies in this sector help save resources of a business for other efforts.
The growing impact of procurement on business and outsourcing supply or services has allowed companies to spend more of their own profits in investing in better offices, newer designs, and streamlining their workflow. Profit margins are growing due to the use of procurement strategies which smart businesses are implementing each day.
Perhaps the most significant impact across business is the way partnerships are being forged. More companies work together to create products and services.
Consumers are often surprised to find that previous competitors are now partners in a new product or service.
Tina Samuels writes for many small business blogs, including covering Internet reputation management services.
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.