April 22, 2022

How Indian CPOs Can Overhaul Procurement: Learning From the Best

How Indian CPOs Can Overhaul Procurement: Learning From the Best

An inefficient supply chain is a symptom that a manufacturer is far from its peak operational strength. It can bleed money, cost time, and labor. 

So what’s the remedy for this? CPOs on a procurement overhaul mission can get the best possible results by focusing on five key action points.

  • Using Clean Procurement Data

Securing clean procurement data is vital to revamping any procurement process. Unclean procurement data is far from helpful. A CPO’s best bet in this regard is to have access to native first-hand data.

A leading F&B company that runs over 30,000 restaurants in India used procurement data to significant effect. The food supply chain enabler identified order delivery mismatches and then rigorously supervised the metadata to identify patterns of flawed deliveries. A comprehensive strategy was then devised to cut it down.

  • Catalog-Based Buying

This involves the procurement of raw materials based on a catalog that serves as the single source of truth for the CPO. The catalog based buying solution is integrated into the ERP system that facilitates the ordering process. After mutual consideration between the supplier and the CPO, the listed prices have been agreed upon.

An EPC company which is a market leader in the infrastructure vertical implemented this. which shortened the time between the PR to PO cycle by 80%.

  • Vendor Consolidation

A fragmented list of vendors can be a liability. Complete vertical integration is an ambitious goal to pursue, but not all have the cash flow or bandwidth to do it. In such a scenario, narrowing down the vendors’ list to a few reliable performers is crucial.

One of India’s leading tire manufacturers deployed the vendor consolidation strategy as a cost-saving measure. Procurement overheads were down by 5%, while the total cost of ownership was reduced by 20%.

  • Vendor Managed Inventory

This refers to a supplier allowing the manufacturing company to take over its inventory management. If executed precisely, the retailing company can reduce its procurement costs while the supplier company can win terms of elevated sales. 

One of India’s premier non-ferrous metal manufacturers reduced its turnaround time by almost 30% by adopting this practice.

  • Sharing Data With The Vendor

Sharing procurement data with suppliers can turn out to be a symbiotic arrangement. It can help weed out delays and slippages that affect the manufacturing process. 

A robotics firm decided to share procurement data with its supplier to refine its manufacturing process. The result was an impressive scaling up of the manufacturing of ventilators to an expedited 90 days. Consequently, the product was rolled out much before its release date.

CPOs can help script a turnaround by focusing on negligent processes that hamstring operational efficiency. Small yet strategic changes in the supply chain can yield huge dividends.