Procurement Priorities for Stronger Performance

In the journey to eliminate value leakage, identifying gaps is only the beginning. The next step in the three step process we introduced in Three Steps to Tackle Value Leakage is setting the right priorities. 

This ensures that procurement and supplier management efforts translate into sustainable improvements.  

In this short article we suggest a set of priorities that create lasting benefits for your organisation through four lenses: Finance, Operations, Compliance and Strategy.  

Operational Priorities

1. Supplier Lead Time: Average lead time for suppliers to deliver goods or services, with a focus on reducing lead times and improving supply chain efficiency. 

2. Fill Rate: Percentage of orders filled correctly and on time, with a focus on improving supplier performance and reducing stockouts. 

3. Inventory Turns: Number of times inventory is sold and replaced within a given period, with a focus on optimizing inventory levels and reducing waste. 

Compliance Priorities 

1. Contract Compliance Rate: Percentage of contracts that are compliant with company policies, regulatory requirements, and contractual obligations. 

2. Regulatory Audit Findings: Number of regulatory audit findings related to contract management, with a focus on reducing findings and improving compliance. 

3. Supplier Certification and Qualification: Percentage of suppliers that are certified and qualified to meet regulatory and company requirements, with a focus on ensuring supplier compliance. 

Strategic Priorities 

1. Supplier Collaboration Index: Percentage of supplier agreements that include joint innovation initiatives, process improvements, or cost-sharing programs, with a focus on leveraging vendor relationships for strategic growth. 

2. Contract Adaptability Score: Number of contract amendments made in response to internal business changes or external market shifts, with a focus on maintaining flexibility and reducing operational risk. 

3. ESG Compliance Rate: Percentage of suppliers meeting environmental, social, and governance (ESG) standards, including carbon reduction targets, ethical labor practices, and diversity commitments, with a focus on aligning procurement with corporate sustainability goals. 

Conclusion 

By aligning procurement priorities with broader business goals, you can turn supplier management into a competitive advantage.  

The key is to continuously assess and refine priorities, ensuring that supplier agreements evolve alongside business needs. Just as identifying value leakage is an ongoing process, setting better priorities requires regular review and adaptation. With this focused approach you can move beyond cost-cutting and unlock real, sustainable growth.