Structured procurement review
How to identify and leverage optimisation potential through a procurement review
Many companies carry out regular reviews at the start of the year, in order to regularly identify optimisation potential. But a procurement review that aims to create a comprehensive overview of the department and the processes also makes sense when there are new framework conditions, such as a change of investor, changes at board level or for compliance reasons. We know from practice why it’s worth it; every review reveals weak points – even in well structured procurement departments.
Let us show you how to find out whether a review is right for your procurement department and how a good procurement review is typically carried out.
Procurement review: The right measure for your procurement?
Are you thinking of reviewing your procurement processes, but you’re not sure how to approach this? We recommend a procurement review if you lack transparency in the following four areas or if you want to uncover potential for optimisation.
1. Standards and regulations: Are standards being complied with? Are internal and external regulations firmly ingrained in day-to-day processes? Can standards and processes be improved and made more efficient? We will create transparency by checking against external and internal regulations and ensuring compliance with them.
2. Security: Are there any signs of gaps in the internal monitoring system? Is it tailored exactly to the needs of your company? We will carry out an assessment of the functionality, effectiveness and adequacy of the internal monitoring system to ensure security in the long term.
3. Economic efficiency and suitability: Are your processes appropriate and efficient? Is performance being optimally measured? We check processes for efficiency and identify possible improvements, which we would then be pleased to implement.
4. Compliance: Are there any doubts about compliance and the company’s associated internal policies? With our procurement review, you can ensure that your Procurement team operates reliably.
So how do you go about performing a procurement review?
Step 1: Transparency of current situation
The first step of a procurement review is to examine the structures and processes in strategic and operational procurement for weaknesses. It is usually necessary to check all of a company’s procurement-related documents and also consult the employees concerned.
Obtaining findings in this way allows project managers to identify the current procurement processes and supplement them with information from survey interviews. This produces a description of the status quo, which contains the first indications of potential gaps and flaws in the procurement process.
Step 2: In-depth review of analysis results
The second step involves checking all the irregularities revealed in the analysis. It is advisable at this point to deal with strategic and operational procurement separately. In the analysis, we will show you potential areas for improvement.
A look into strategic procurement
When analysing strategic procurement, the focus is on the design and implementation of tenders. The key question here is: do all processes allow for maximum systemic application, efficiency and transparency?
Appropriate checks – using procurement manuals, company guidelines and documents relating to previous calls for tender, for example – examine how this can be structured, how supplier negotiations can be conducted, how tender awarding decisions can be made and how tendering procedures can be logged.
If your firm has consistent company-wide standards for each step, which are also implemented with efficiency and traceability, then no further action is required. However, if no consistent standards exist or if they are not optimally implemented, we can open up optimisation potential for you.
Operational procurement under the microscope
The purpose of a review is to uncover gaps and errors in the day-to-day business of your operational procurement. This looks into order processing, order confirmation, receiving goods, complaints management and invoice management within the company. The corresponding investigations are primarily aimed at determining where the procurement organisation can better standardise processes, comply with rules or make better use of strategically negotiated procurement potential.
Step 3: Rectifying shortcomings by implementing best practices
At the end of each review, there is an extensive final report, including a list of all shortcomings and comments about what best practices could rectify them. This report can of course only have a lasting impact if it’s not just shared with procurement managers, but if improvement measures are agreed with company management.
The reasoning for implementing the measures should be: with a well-structured and target-oriented procurement review under their belt, procurement managers and auditors should have no difficulty in making the right investment decisions and improving their procurement in a targeted manner.
Are you considering the implementation of a structured procurement review?
We would be happy to tell you about how we can carry out a review for you – without any obligation. Dr Peter Wessmann is available if you have any questions on procurement reviews.