To capture or regain the potential value the shifts created, procurement leaders may need to completely rethink their strategies for the affected categories. Our analysis suggests that procurement could gain the most by focusing its strategic initiatives in five key areas: strengthening supply-chain resilience, zero-basing the design of category value-creation strategies, investing in supplier partnerships and innovation, accelerating adoption of digital and analytics, and transforming to an agile operating model. According to our research, in the five years immediately following the 2008 global financial crisis (GFC), total return to shareholders (TRS) for companies with top-quartile procurement capabilities was 42 percent higher than for companies whose procurement operations were in the bottom quartile (Exhibit 1). At the pandemic’s onset, procurement departments switched to crisis-management mode to help companies alleviate disruptions, including sourcing personal protective gear for employees and helping smaller suppliers manage their cash flow. Press enter to select and open the results on a new page. While the impetus for change is largely consumer-driven, the burden of the transition will fall squarely on chief procurement officers (CPOs) who know sustainability is a necessity, not a luxury. The enhanced transparency and standardization can drive significant bottom-line savings. IT asset management best practices for your organization. Based on our research, conversations with global procurement leaders, and our work with large organizations, we believe that five steps will help procurement leaders address the current situation and set up their organizations for success (Exhibit 3). Never miss an insight. It should be operationally distinct from other departments and divisions. McKinsey & Company research has confirmed that procurement pays: Companies with high-performing procurement functions consistently outperform their rivals on a range of financial indicators, and the best companies are building advanced talent management strategies into the very heart of their procurement … In a separate McKinsey survey, 93 percent of procurement and supply-chain leaders said they planned to increase the resilience of their supply chains, and 44 percent said they would be willing to give up some short-term efficiencies to get it—although this sort of trade-off can prove avoidable in some cases. 1. While adopting the new approaches, companies should also stay focused on traditional approaches to achieving excellence in category management: Value capture. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. To successfully deploy the new approach, a company must create the right culture and bring new digital and analytics skills to the procurement team. Spends should be segmented as required by the business into logical groups of similar items or services from suppliers. Based on our experience of working with a large number of businesses, we recommend the following ITAM best practices. Reinvent your business. The winning procurement organizations will adopt a continuous learning culture as a way of life. Record keep and report - real-time audit trails and reporting 4. Various tools and platforms have been developed. However the reality is that most Procurement functions have not moved as quickly to address supply chain efficiency as some organisations have demanded. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. Procurement leaders are reevaluating individual spend categories to make the most of shifting market dynamics and address the risks posed by changing value pools. Most transformations fail. Simply put, evolution is not enough. Something went wrong. Full transparency into analytical opportunities and validation status is enabled by automated data extraction from enterprise resource-planning (ERP) systems and databases, along with automated harmonization and classification. E-commerce integrator software powers an internal order-coordination platform that manages replenishment data and automatically places orders to B2B platforms. (For more, see “A next-generation operating model for source-to-pay.”). Auditing features check data accuracy and compare data with supplier reports and cross-functional data. McKinsey, the implementation of procurement and best practices can result in 5 to 10 percent of productivity improvement and 3 to 5 percent of cost savings at the construction industry. Unleash their potential. Learn more about cookies, Opens in new … What are the procurement best practices in this market? Yet procurement has helped companies weather global crises before. Unleash their potential. Machine-learning features improve the tools and perform data cleansing, categorization, and enrichment activities. Industries ranging from energy and transportation to banking and telecommunications are seeing early successes with zero-basing, following examples from consumer industries. Never miss an insight. Team meetings, supplier site visits, negotiations, and other face-to-face interactions that procurement professionals took for granted went virtual, or went away—all calling for a new ways of working. In the Appendix, we set out the differentiating features of each element of the approach. The purpose is to identify industry-specific best practices and trends in the Procurement space, as well as to quantify key operational metrics for comparison of participants We gathered and evaluated 53 quantitative benchmarks* and qualitative practice points Most metrics and practices were organized along three primary themes: VALUE CREATION More than 161.000 people in 154 countries in firms across the PwC network ... PwC’s Global Best Practices®, as well as practical tools & templates to drive results during and after the project. We strive to provide individuals with disabilities equal access to our website. These tools also promote the transition from spot checking to total quality control. 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