In the context of procurement optimization or supply chain optimization, it is important to know that each procurement or supply chain department is unique. It is shaped by the people who work there every day. As a rule, processes have grown historically, and the degree of maturity and multitude of interfaces is different everywhere. So, it is not surprising that the potentials of different procurement or supply chain organizations and the respective problem areas differ a lot.

But regardless of the individuality of a procurement or supply chain department, there are always five forces that determine the potential. These 5 forces can simultaneously inspire but also inhibit departments. We speak synonymously of design fields, since the organization in these ranges has the possibility to become proactive.

The five forces of procurement optimization / supply chain optimization

Operational Excellence

Clear responsibilities, clear responsibilities, regulated processes and common goals. Defining and coordinating these corresponds to the main task of the first design field of procurement optimization, Operational Excellence. By this we mean the constant synchronization and optimization of the company’s overarching strategy and goals with the processes of the entire value chain. As a result, this part of procurement optimization or supply chain optimization is the guarantee for efficient and effective entrepreneurial action.

Material group management

Without goals, everyone simply orders somewhere, so the second design area of supply chain and procurement optimization, material group management, is an important building block. If material group management exists, it often builds on established structures and is often not very transparent. A structured material group management creates transparency and sets clear goals regarding the procurement market, supplier structure and awarding strategies.

Supplier management

Supplier management goes hand in hand with this as the third of five design fields. This involves the systematic classification, evaluation and support of suppliers as well as the digital exchange of information and documents, often in the sense of smart procurement. Transparency also plays a decisive role in this area of supply chain and procurement optimization. Procurement must always know which of its suppliers are strategically important, which still has to be developed and which supplier currently has a critical status. The high art is to find the right suppliers and to bind them to the company.

Automation

And this brings us to the fourth design area, automation as part of a digitization strategy. In order to optimize the supply chain, it is essential to examine possible automation points within the process. There are many possibilities. However, each procurement or supply chain department has to check individually which points come into question and make sense. In any case, the aim is to automate all those recurring administrative activities that do not directly create added value and thus prevent the focus on strategic activities.

International Organization

The last and fifth design field of procurement optimization, the International Organization, is not only relevant for those companies that have subsidiaries distributed around the globe and thus procurement departments. As the name suggests, the aim of this design field is to use the advantages of an (international) customer-oriented organization to optimize procurement processes with the help of an optimized organizational structure and a common system of objectives.

Supply chain optimization and procurement optimization easily made

The 5 forces for procurement and supply chains are not the sum of the individual design fields of procurement optimization, but much more together. Operational Excellence lays the foundation for the overall organization by defining responsibilities and responsibilities. Supplier management is based on merchandise group management. Automation relies on the previously set up optimal processes.  In the International Organization, the design fields are occupied by the right people.

In short: if you look at the potential of procurement optimization / supply chain optimization through the eyes of the 5 Forces, cherry picking is the worst thing you can do. The five design fields build on each other, strengthen each other and cannot function optimally without each other.