,Is Procurement Training Part of Your Business Plan in 2023?

Procurement training is crucial for any business plan in 2023. It affects customer satisfaction, product quality, cash flows, and profitability. As supply chains become more intricate and limited, having essential skills is vital to succeeding in today’s business environment.

Procurement training should be a vital part of any business plan in 2023, as procurement impacts everything from customer satisfaction and product quality to cash flows and profitability. With supply chains becoming more complex and constrained, leveraging critical skills is essential for success in today’s business landscape.

Here are four must-have skills for procurement professionals in 2023.

Supply chains are becoming more and more complex, constrained, and daunting by the day. Covid and post-Covid periods have reaped havoc on supply lines. All these have led to costly impacts on businesses and the global economy. As a result, we’ve seen everything from recessionary pressures to significant inflation, layoffs, and the imposition of austerity measures.

Leveraging Critical Skills in 2023

Many business leaders are looking to their supply teams to increase supply reliability and reduce supply costs. Consequently, Procurement professionals have a formidable task, starting with the 2023 fiscal year. Moreover, “Pricing” management remains critical. However, the leverage of other critical skills is required to be successful in today’s business landscape.

Here are Procurement’s some must-have skills to navigate the current global climate in 2023. They all include enhancements of:

Spend Management

Spend management is a critical skill for procurement professionals in today’s business landscape. It involves the formulation and execution of an annual buying plan that includes forecasting demand for different categories of products and services, assessing the market for each commodity, determining the method for procuring each commodity, and identifying the resources needed for successful procurement.

The Role of Procurement Training

Procurement training is essential for developing critical skills such as identifying cost-saving opportunities, negotiating favorable contracts, and managing supplier relationships effectively.

The underpinning of effective spend management is the capacity to formulate and execute an Annual Buying Plan. As such, a good buying plan should include the following components.

    • Forecast: A projection of demand for each of the various categories of products and services (referred to as “commodities”)
    • Market Analysis: An assessment of the market for each commodity
    • Approach: The method used for procuring each commodity
    • Resources: The human and other resources required to procure each commodity successfully
    • Historical Spend: A summary of the previous years’ expenses for procuring each commodity

Risk Management:

It goes without saying that risk management is an essential component of procurement training. In today’s challenging business environment, Procurement professionals must be equipped with the skills to identify, assess and mitigate the different types of risks that could impact their organizations. These include supply, price, financial, legal, and safety risks.

The Role of Procurement Training

Procurement training in risk management enables professionals to develop robust risk management strategies, establish contingency plans, and negotiate favorable contracts that protect their organizations from potential losses. With the increasing complexity of supply chains and the heightened risk environment, procurement training in risk management has become critical to ensure businesses remain resilient and adaptable.

We must make provisions to manage the following types of risks:

    • Supply Risk: The possibility of production line shutdown, failure to meet customer requirements, and/or other catastrophes due to the non-availability of certain goods or services at a particular time.
    • Price Risk: The possibility that prices for goods or services could be adjusted to your organization’s disadvantage.
    • Financial Risk: Your organization could possibly lose existing assets, future revenue, or potential income due to a financial or economic event or series of events. This risk category appears to be eminent.
    • Legal Risk: The possibility that your organization could be a party to a lawsuit, particularly in which your organization has a lower-than-average probability of prevailing.
    • Safety Risk: The possibility that a person could be injured or killed or property damaged or destroyed.

Supply Chain Agility and Visibility

The importance of supply chain agility and visibility cannot be overstated. Without it, procurement departments risk inefficiency, reduced performance, and increased costs, which can negatively impact overall business performance. The complexity of today’s global supply chains requires procurement professionals to have the skills and knowledge to manage these risks effectively.

The Role of Procurement Training

Procurement training can provide professionals with the tools they need to ensure supply chain agility and visibility, enabling them to quickly adapt to changing circumstances, mitigate risks, and maximize value for their organizations.

Limited visibility can increase the total cost to serve and the total cost of ownership, reduce supply chain performance and increase the loss of value in your supply chain. Visibility of the interaction between the five critical supply chain dimensions is vital to supply chain success. These areas are complex components, and a thorough understanding of their cause-and-effect relationships is critical. The goal here should be the acquisition of visibility as quickly as possible. Why is visibility critical to realizing supply chain agility and adaptability? The underpinning of agility is visibility, which is a critical enabler. According to a Deloitte study, 66% of procurement leaders claim they have no or limited visibility of their supply chains.

Understanding of Customer Requirements

A deep understanding of customer requirements is essential for procurement departments in creating an effective procurement strategy. Failure to do so can lead to customer dissatisfaction and even loss of business.

The Role of Procurement Training

Procurement training is critical in equipping professionals with the skills needed to understand and anticipate customer needs, enabling them to source and acquire goods and services that meet those requirements.

Utilizing a robust External Customer Requirements Matrix facilitates the capture and understanding of the voice of the customer (VOC) and creates a framework for value creation. It also makes a focal point for corporate strategy, tactical and operational planning, and impetus for corporate and departmental missions, visions, and values. A good Customer Requirements Matrix provides valuable inputs and data points for supplier selection criteria and cost reduction opportunities and provides guidance on designing internal processes and departments and allocating limited resources.

Decisions around Supplier Selection

Decisions around supplier selection are a critical aspect of procurement, with a significant impact on an organization’s bottom line. Procurement professionals must possess the skills to assess the suitability of potential suppliers, evaluate their capabilities and reliability, and negotiate contracts that align with organizational goals. Not having a robust strategy for supplier selection can result in suboptimal business outcomes, including delivery delays, increased costs, and quality issues.

The Role of Procurement Training

Procurement training is vital. It equips professionals with skills to understand and anticipate customer needs. This enables them to source and acquire goods and services that meet requirements.

Unfortunately, it is not usually an easy task to select a supplier. The world-class procurement professional must look beyond a supplier’s attractive price and smooth-talking sales staff. To ensure supplier performance and avoid selection errors, procurement departments should implement a supplier qualification method. This involves a series of tests to determine the supplier’s suitability for the organization. Nevertheless, while no method can fully guarantee supplier performance, a sound qualification process can significantly reduce the chances of making a selection error.

Investing In and Assessing Procurement Training

As procurement becomes an increasingly vital function within organizations, it’s essential to invest in procurement training programs. The year 2023 presents a unique opportunity for companies to upskill their procurement teams and enhance their abilities to navigate the complexities of global supply chains. However, it’s not enough to simply provide training; it’s crucial to assess the effectiveness of these programs to ensure that they meet the evolving needs of the organization. In this regard, regular evaluation of procurement training programs is essential for identifying gaps and implementing targeted solutions to improve the overall effectiveness of procurement processes.

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Published On: January 17th, 2023Comments Off on The Criticality of Procurement Training in 2023
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David Millington, M.Sc., QSM, NPDP, CL6σBB, SPP, SPSM3®, CM®
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David Millington, M.Sc., QSM, NPDP, CL6σBB, SPP, SPSM3®, CM®