Business functions are transforming every moment. Innovative business models and new-age technologies are enabling sweeping changes and reducing global boundaries. Hand-written purchase orders with multiple carbon copies has become legacy in less than 10 years. ERP systems are being replaced by cloud solutions. Gartner predicts worldwide cloud services will grow at a CAGR of 12%. Global procurement software is poised to grow at a CAGR of 10%. All these are leading to vanishing boundaries and shrinking distances. Boundary less procurement is the new age procurement.
What is Boundaryless Procurement?
New age procurement entails charting out strategies to obtain the most attractive source, eliminate redundant activities and streamline processes to become boundary less. Boundary less procurement involves procurement strategies around - global reach, lean teams and harmonization.
Now is a competition between supply chains rather than individual suppliers. To avoid being the weakest link in a supply chain, some of the key focus areas are given below.
- Source: Identification and development of the most appropriate and efficient source. Contemporary business demands green initiatives, fair trade principles and labor law compliance. Sourcing approaches and processes need to meet these norms in order to possess a sustained competitive edge. Efficient access and use of global supply base and its network will enable development of the most appropriate sourcing partner.
- Regulatory Principles: Elimination of geographic boundary in the sourcing process is common. However, there is a pertinent need to understand and comply with the cross-border regulatory norms. Some examples include multi-currency processes, global taxation and import/export policies. Procurement processes and systems supporting these regulatory principles and accommodating future changes will be a major success ingredient for boundary less procurement.
- Risks: Untapped sources, new horizons and new supply sources introduce higher than expected risks. Common incidents of risk occur in delivery conditions, timelines, quality, finance and other specific areas.In order to achieve results through enhanced global reach, risk assessment is important. Rigorous risk identification and management is achieved through charting out risk impact, risk probability, and mitigation actions.
New methods of procurement demand a revamped approach to the way teams have been functioning. Localized teams replicated in all countries/geographies imbibe high costs, redundancy and inefficiency. Structured approach to centralization and knowledge sharing is the order of the day.
- Structure: Most efficient mechanisms call for a hybrid team with both centralized hub and regional wings to co-exist and function in tandem. Centralized teams are responsible for strategic decisions and policy roll-out. Regional counterparts bring-in the region-specific variations. This enables enforcement of global policies with regional inclusions in a lean and non-redundant team structure.
- Talent: Team talent management is paramount to the success of boundary less procurement. Key skills need to be acquired and nurtured for best results. Fresh talent across regions brings-in specialized knowledge and approaches.
- Hierarchy: Multiple level, multi-department offline approval workflow is legacy. Offline workflow hierarchy leads to inefficient process and increased cycle times. Best practices involve online rule-based workflow hierarchy with lean approval levels enabling efficient information flow, meaningful control and authority. In the current world of business spanning multiple locations, departments and geographies, approval hierarchies are driven by business needs and not by mere geographic/location boundaries.
Essential constituents of a boundary less procurement involve common integrated processes and systems. There is a pervasive need to maintain common processes and an integrated application backbone acting as a custodian of global policies. We define this as harmonization. Harmonization can be achieved through the following activities.
- Streamlined Processes: Common process template imbibing best practices, approval rules, release strategies, master data management, access rules and partner management efficiently harnesses benefits of integrated processes and systems. Acceptable localizations to support regional rules, policies and methods should be add-on to overall global processes rather than isolated silos. Standard operating procedures and SLAs need to be defined, adhered to and revisited regularly to keep them relevant and up-to-date.
- Integrated System: Integrated dataflow across sub-functions like sourcing, requisitioning, purchasing, invoicing, receiving and payments is key to sustained success. Most efficient approaches involve weaving all these sub-functions under a single end-to-end procurement system. If pointed systems are maintained, data flow integrity and completeness have to be considered. Interfacing systems require seamless relay of data in correct format, frequency and structure. Data protection, storage and retrieval policies have to be framed to reap benefits of the boundary less procurement.
- Collaborative Connects: Connected individuals add value in quick information exchange and reduced cycle times. Collaborative exchange of data between partners, suppliers and users can be increased multi-fold by harnessing online portals, app-based access, chatbots and other contemporary collaborative tools.
Above tenets provide a simple guidance to a successful roadmap for the future of procurement. In days to come diminishing boundaries will not be a differentiator but a necessity.