Strategic Sourcing and Negotiation Skills

Written Analysis of Case

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Institute of Business Administration, Karachi

PGD Program

HADAYAT ALI ERP 11807

Assignment – 1

Strategic Sourcing and Negotiation Skills by Mr. Faisal Jalal

Q#1

Please read the attached Paper “Accelerating Procurement’s Impact on the Bottom Line:” and identify 5 Key Learnings that you would like to apply in your organization?

Answer

Key Learnings:

1- In today’s competitive world, each department needs to create cross functional synergy to achieve organizational goals. Profits or bottom-line are no more viewed as a function of sales. Because a dollar saved is worth more than a dollar coming from sales. 1 dollar from saving in procurement has more positive impact on your bottom line as compared to a dollar coming from sales.

2- Procurement department faces stiff challenges at many fronts like savings tracking and reporting, identification of savings using latest available tools, dissonance between procurement and finance on savings by the procurement department. The most critical challenge is the translation of cost saving and cost avoidance to bottom line as viewed by finance executives.

3- Organizations that place highest emphasis on R&D for innovation make it grimmer for procurement to translate savings to bottom due to accounting difference between operating and capital expenditures. OPEX expenditures can easily be tracked for savings while impact of CAPEX on bottom line is difficult to quantify.

4- Organizations can compare their financial statements with other industry peer and competitors to gauge their procurement spending pattern for different accounting heads and then transfer these matrices to savings. While procurement matrices are hard to transfer because of inconsistency in metric definitions in the absence of regulator from company to company.

5- It is imperative for procurement team to deliver high value and impact on bottom line by increasing visibility of savings with flexibility in an ever changing and complex organizational environment on day to day basis. Use of technology for intelligent spend analytic, strategic sourcing, contract management, dashboard reporting and gauging impact of exchange rates can improve visibility of cost saving to bottom line.

6- When you will diligently analyze your “procure to pay” cycle, you can identify areas which increased cost but same value. Streamlining your “procure to pay” process by reducing time between different processes can help to reduce costs.