Procurement and global sourcing can account for more than 50% of overall costs in many industries, making purchasing a strategic operation with a huge bottom-line impact. In an era of faster product cycles, global competition and increased risk of supply-chain disruption, corporate leaders need to know how to use procurement - now often called supply management - as a competitive advantage.
Today, world-class supply leaders use procurement as a strategic accelerator and to achieve cost savings, which can average 8% to 12% of total procurement costs, and as much as 40% for some industries or categories. Also, procurement improvements can result in shorter cycle times, product innovation, and increased revenue. Despite procurement's increasing importance, a recent Bain survey found a growing divide between what corporate leaders expect and what their supply management teams are able to deliver: 50% of supply management executives interviewed considered their procurement organizations ineffective and 65% admitted they don't measure procurement performance in creating shareholder value.
Bain has worked on over 500 cases across all major industries and around the world, helping clients create world-class procurement organizations. Our approach is based on three key principles that we've found characterize procurement leaders. They practice strategic supply management by understanding how procurement can accelerate their company's strategy, and then figure out the criteria for a winning supplier-low cost, speed or flexibility. They think cross-functionally, including human resources, finance and other departments in their teams. And, they view supply management as an agent of innovation, drawing R&D insights from customers, suppliers and even competitors.
Bain has helped clients reduce purchasing costs by 5% to 40%, while improving quality and supplier performance. Our approach starts with a focused diagnostic to identify the critical levers of value, and rank opportunities. We provide our clients with support with everything from supplier negotiations to making the process or organizational changes needed to sustain results.
To find out more about Bain's work in this capability area, please contact the practice.
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Quick cash meets competitive purchasing 
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