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Five Ways to Ensure your Sourcing Strategy Never Disrupts the Supply Chain

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Because sourcing is at the heart of any procurement strategy, it is critical to the success of your supply chain.

Poor sourcing strategies have a negative impact on the supply chain such as  downtime, low inventory, and a lack of supply chain transparency.

Here are five things you can do to protect your supply chain from disruptions:

1. Assemble the Right Team

It goes without saying that your supply chain requires people to function. More importantly, it requires the right people.

Consider the following when assembling your sourcing team; such as the ability to quickly learn, analyze large amounts of data, build long-term relationships, communicate, and negotiate.

2. Provide the Right Tools

In today’s supply chain climate, your productivity depends on the tools you make available to your team and the tools and solutions they have at hand can make all the difference.

With emerging technologies across the globe, the supply chain has never had the potential to be more efficient. 

A great example of a sourcing solution is SAP Ariba’s Sourcing tool.

3. Have a Solid Sourcing Strategy

Your sourcing strategy is used to find the most effective, efficient, and reasonably priced solution to your supply chain needs.

So, how do you identify the right product or supplier?

Here are some tips:

  • Understand the market trends. 
  • Always pick quality and time over price. 
  • Build relationships with several vendors in the market. 
  • Have clear expectations or targets. 

4. Have Multiple Vendors for Each Product Supplied

Building long-term relationships with your vendors or suppliers is extremely beneficial to the supply chain. However, if the pandemic taught us anything, it’s the importance of having backup plans.

Supply chains are more flexible, visible, and resilient than ever before. Despite this, there is still an element of uncertainty surrounding supply chains.

To be better protected, it is critical to work with more than one supplier. A great place to start is the Ariba network where over you can connect with over 40 million suppliers and growing!

5. Constantly Review Suppliers

A supplier review provides insight into the supplier’s performance.

Constantly reviewing a supplier ensures that potential disruptors are identified as soon as possible; giving you the opportunity to prevent them from causing harm to the supply chain.

To get the most out of your supplier’s performance, make a list of performance indicators. Quality, service, delivery rate, damages, compliance, innovative ideas, and cost are some examples.

Summary

Disruptions in the supply chain are undesirable. It’s not just that they cost the company time and resources, though those are significant. The unfavorability stems from the impact on the company’s customers.

What are some common disruptions in your supply chain?

One of your primary responsibilities as a supply chain or sourcing manager is to prevent disruptions. Particularly artificial disruptions. One of the most effective approaches is to develop an effective sourcing strategy.

For your procurement solutions and services, click here at www.premikati.com

Private Equity

Capture And Enforce Savings With A Central Private Equity Level Procurement Marketplace

By Private Equity No Comments

A private equity level procurement marketplace such as Premikati’s PE Marketplace allows firms to maximize on savings utilizing group purchasing power and then enforce those negotiated rates to ensure savings are captured. Opportunities for purchasing autonomy remain at the portco level while spend analysis and sourcing events can be managed centrally at the PE level. PE firms are also able to add or remove portcos at will as they are being sold and acquired—removal occurs within minutes when needed. PE-level purchasing also assists in reducing rogue spend. 

Current State of Procurement Purchasing Across Portcos

The use of siloed procurement technology such as SAP Ariba Snap is common among many portfolio companies. Expense reports are also the norm. Cost optimization processes remain at the individual portco level leading to missed opportunities, compliance issues, and a significant reduction in savings for PE firms as a whole. PE firms may feel overwhelmed by the complexities of cross-portfolio sourcing and may face resistance to a centralized  approach by portco-level executives. 

Problems With Procurement Purchasing at the Portfolio Company Level

Purchasing at the portfolio company level wastes time and resources across the board. If purchasing is happening at this level, it is likely that deals have also been negotiated piecemeal, missing the opportunity to leverage group buying power as well as consuming employee hours across each individual organization for a process that only needed to occur once.   

Data is siloed between portcos and, because of this, there is a major lack of spend visibility which also results in its own savings reductions. Compliance issues such as rogue purchases can quickly arise when purchasing occurs at the portco level instead of in a controlled, centralized, PE environment with full cross-portfolio spend visibility. 

Purchasing at the portco level results in:

  • Lack of controls
  • Inability to enforce negotiated rates / prices
  • Rogue purchases

Savings lost due to purchasing at the portco level equates to 2-4% of spend. 

Benefits Of Purchasing at The Private Equity Level

The most obvious benefit of purchasing at the private equity level is savings. Purchasing at the PE level allows for strategic choices that result in obtaining the lowest possible price. These prices are only available due to PE-level spend analysis which allows for the identification of spending patterns that could lead to potential deals. This leads to the PE firm’s ability to effectively source and leverage group buying power to purchase at the best rates and prices. 

By completing the entire procurement journey at the PE level utilizing a private marketplace, PE firms can achieve an expected >%4 spend savings achieved across portcos. This is a quick and sizable win for PE firms struggling to meet requests for procurement savings—a notable, even trendy area of critique among PE firms in recent years.

Additionally, rogue spend becomes more apparent in this model and quick action can be taken. 

How The Private Marketplace Model Enhances PE-Level Purchasing

Using a central, PE-level procurement marketplace, PE firms are able to ensure that items and services are being obtained at the lowest prices possible resulting in enforceable savings. Because portcos retain some procurement autonomy with full approval controls at the portco level, the switch to a PE-led procurement model becomes smoother. Premikati also offers change management solutions to guide each portco’s adoption. Because PE Marketplace sits alongside other technologies—it is a non-integrated solution—portcos can continue to use additional technologies as they see fit.

On the PE side of the equation, PE Marketplace offers the ability to easily remove portfolio companies from the system within minutes if divested. The addition of new portcos takes only a few short days and is based around the company’s current eprocurement solutions.

 

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Private Equity

Private Equity Firms Gain Quick Wins With Optimized Sourcing

By Private Equity No Comments

Sourcing at the private equity level offers maximized savings via leveraged buying power, the ability to standardize processes and best practices, increase spend visibility and analysis capacities, and improve valuation and EBITDA figures. 

Why source everything separately across each individual portfolio company when private equity-level sourcing can increase rate of return, maximize savings, efficientize SOPs, and lead to insightful spend analysis across all organizations? Prior procurement platforms kept power at the portco level, but PE firms have a notable leg up in their sourcing efforts when they can utilize their full, leveraged buying power, resulting in quick, sizable savings. 

Current State of Sourcing Across Portcos

In many PE scenarios, all sourcing is executed at the portfolio company level—there is no PE-level control whatsoever. This caution-to-the-wind approach results in a lot of lost savings and opportunities. Of these PE-firms that do not utilize a more inclusive strategy, there is often mounting pressure to generate good returns, and procurement can be seen as a quick win for savings with sizable long-term potential as well. While some portcos may seek to retain autonomy in procurement, insightful spend analysis figures and a well-planned roadmap can often combine to make a compelling argument for PE-led sourcing. 

Problems With Keeping Sourcing at the Portfolio Company Level

When sourcing is only happening at the portfolio company level, there is a tremendous hit to savings potential as well as a higher likelihood of siloed data practices which open the company to a wide range of risks and other detriments. When portcos retain full autonomy in sourcing, this usually results in:

  • Lack of aggregated spend across portcos
  • Lack of standardization of sourcing processes and best practices
  • Overpayment due to minimized savings and potential discounts. 

In terms of savings lost, this can equate to 9-16% per event. This lack of visibility and reduction in savings is often enough for many PE firms to consider moving sourcing to the PE level, because it can result in fast and impactful ROI. 

Benefits Of Sourcing at The Private Equity Level

How do things change when sourcing moves from the portco level to the private equity level? The magic word of the day is “leveraged buying power.” Sourcing at the PE level offers a major boost attaining the best possible prices from vendors. Partner-led execution of sourcing events ensure maximized savings that hinge upon best practices. 

Through the combination of spend analysis and sourcing at the PE level, private equity firms can immediately increase visibility, reduce compliance risks, boost leveraged buying power to negotiate the best deals, and standardize sourcing processes across the board—all of which add up to notable savings. 

How The Private Marketplace Model Enhances PE-Level Sourcing

To nix the siloed approach to procurement across portcos, PE firms can adopt a private marketplace model as part of a greater e-procurement strategy. With Premikati Marketplace, PEs can take advantage of PE-negotiated contracts and catalogs while utilizing the Private Equity Marketplace underpinned by SAP Ariba. No matter the current state of e-procurement technology within organizations at the start, Premikati Marketplace is a quick-to-deploy, lightweight solution with lighting-fast time to ROI. Plus, it can easily integrate into pre-existing procurement processes for fast adoption—with change management services provided to each portco to ease the transformation. 

This PE-level option offers the ability to quickly turn on or off portcos as they are acquired or sold, retain centralized control with  portco-level authority, and numerous ways to maximize savings across all participating organizations. Using this sourcing approach comes with the additional benefit of deep spend analysis at the PE-level which has been known to boost valuation and EBITDA figures even after only a short duration of use.  

 

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