As Australian businesses are impacted by a slowing economy and high inflation, it is vital for organisations to ensure the procurement function is focused on the key strategic challenges for the organisation and continuing to innovate the way it operates and delivers value for the business. Procurement is a key function as it can directly impact:
• Cost Savings: Effective procurement strategies help businesses secure goods and services at the best possible prices. By negotiating favourable terms with suppliers, companies can reduce their overall operational costs, leading to improved profitability.
• Quality Control: Procurement ensures that the business sources high-quality materials and services, which directly affects the quality of the final product or service. Reliable procurement processes involve rigorous evaluation of suppliers to maintain consistent quality standards.
• Risk Management: A well-structured procurement process helps identify and mitigate risks in the supply chain, such as supplier reliability, compliance with regulations, and geopolitical risks. By diversifying suppliers and building strong relationships, businesses can safeguard themselves against potential disruptions.
• Supply Chain Efficiency: Efficient procurement optimises the supply chain by ensuring timely delivery of goods and services. It involves planning and forecasting demand accurately to avoid stockouts or overstock situations, thereby streamlining operations.
• Compliance and Sustainability: Procurement plays a key role in ensuring compliance with legal and regulatory requirements. It can also drive sustainability by selecting suppliers that adhere to ethical practices and environmental standards, aligning with corporate social responsibility (CSR) goals.
Given the growing emphasis on organisations to respond to each of these business needs trace. has developed a comprehensive Procurement Excellence Framework spanning the entire procurement journey.
1. Strategic Procurement
Increasingly, procurement is at the forefront of strategy. With economic and political events fundamentally changing supply chains, organisations must consider the impacts of procuring goods and services – navigating service, profitability, and risk.
Trace. can help executives answer these key questions to help review their procurement strategy:
1. What are the organisation's overall goals and objectives?
• How does procurement align with and support the company’s strategic goals?
• What specific outcomes is procurement expected to achieve, such as cost savings, quality improvement, or innovation?
2. What is our current spend and procurement process?
• What is the total spend across different categories, and how is this spend managed?
• Are there any inefficiencies or areas of excessive cost within the current procurement process?
• Are there changes in the business that could impact the level of activity being procured (e.g. if business volume has declined can some activities be delayed / rescheduled?)?
3. Who are our key suppliers, and what is our supplier management strategy?
• Who are the critical suppliers, and what are their strengths and weaknesses?
• How do we manage supplier relationships to ensure quality, reliability, and strategic partnerships?
4. How can we mitigate risks in the supply chain?
• What potential risks exist in the supply chain, such as supply disruptions, geopolitical issues, or compliance risks?
• What risk mitigation strategies can we implement, such as supplier diversification or contingency planning?
5. How can we optimise our sourcing strategy?
• What sourcing strategies can we employ to reduce costs and enhance value (e.g., global sourcing, single vs. multiple sourcing)?
• How can we leverage competitive bidding, negotiations, and strategic partnerships to get the best value?
6. What role does sustainability and ethics play in our procurement strategy?
• How can procurement support the organisation’s sustainability and corporate social responsibility (CSR) goals?
• Are our suppliers compliant with ethical standards, environmental regulations, and fair labour practices?
7. How do we ensure quality and compliance in our procurement activities?
• What measures are in place to ensure that procured goods and services meet the required quality standards?
• How do we ensure compliance with relevant laws, regulations, and internal policies?
8. How can we leverage technology and data in procurement?
• What procurement technologies can enhance our procurement processes (e.g., e-procurement platforms, spend analytics)?
• How can data analytics be used to gain insights into spending patterns, supplier performance, and market trends?
9. How do we measure procurement performance?
• What key performance indicators (KPIs) should be used to measure the success of procurement activities (e.g., cost savings, procurement cycle time, supplier performance)?
• How do we track and report on procurement’s contribution to the organisation’s strategic objectives?
10. How can we foster innovation through procurement?
• How can we collaborate with suppliers to drive innovation and improve products or services?
• Are there opportunities to explore new markets, materials, or technologies through strategic supplier partnerships?
11. What is our long-term procurement strategy?
• How will our procurement strategy evolve to meet future business needs and market changes?
• What are our plans for developing and upskilling the procurement team to support strategic goals?
2. Sustainable Procurement
Sustainability is a key consideration for organisations – and Procurement functions can play a significant role by shaping how organisations operationalise sustainability across its supply chain. Sustainable Procurement describes how the process of sourcing goods and services can achieve positive environmental, social, and economic impacts.
Five key considerations for sustainable procurement opportunities:
Environmental
1. Product Design: Are you choosing products and services that are energy-efficient? Are you choosing products that are made from recycled materials, or have minimal packaging?
2. Emissions: Are you considering suppliers emissions as part of measuring your own Scope 3 emissions?
Social
3. Suppliers: Do you have an appropriate supplier due diligence and risk assessment process in place to know the level of risk within your supply chain? Do you have a Modern Slavery Statement?
Governance
4. Total Cost of Ownership: Are you considering the total cost of ownership to ensure cost-effective purchasing decisions?
5. KPIs & Accountability: Do you have appropriate KPI and Performance Reporting to manage suppliers' sustainability?
How Trace Consultants Can Help:
We can help your organisation assess the effectiveness of current sustainable procurement practices and support the design and development of a pragmatic strategy and roadmap to drive improvement in targeted areas.
3. Category Management
Category Management involves dividing products and services into discrete groups or categories. This allows organisations to focus on specific segments of their procurement spend, tailoring strategies to the unique characteristics and market conditions.
At trace. we take a three-step approach to help review your category management:
1. Category Analysis - When is the last time you reviewed your Categories?
a. Identify cost savings potential (rate reviews & benchmarking)
b. Identify areas of concentrated spend
c. Scenario modelling of current trends, competitor positions & options
d. Evaluate risks with existing suppliers and emerging market trends
2. Strategic Alignment - How aligned are your category strategies to the business’ current needs
a. Supplier strategy – e.g. balance strategic relationships & competition
b. Evaluating a category management fit with broader strategic vision and goals
c. Review gaps across procurement processes and strategic objectives
3. Category Execution - What opportunities exist to implement changes across categories?
a. Executing category strategies through sourcing and procurement practices.
b. Ensuring compliance with procurement policies and procedures.
c. Monitoring performance and adjusting strategies as needed
Example Categories for an Automotive Manufacturer
Direct Materials
• Raw Materials: Steel, aluminium, plastics, rubber.
• Powertrain: Engines, transmissions, systems.
• Chassis Components: Suspension systems, brakes.
• Electrical: Wiring harnesses, batteries, alternators.
• Interior: Seats, dashboards, infotainment systems.
• Exterior: Body panels, windows, lighting systems.
• Tires and Wheels: Tires, rims, alloy wheels.
• Maintenance, Repair, and Operations (MRO)
Indirect Materials and Services
• Office Supplies & Equipment: Stationery, computers, etc.
• Facilities Management: Cleaning, HVAC, Security.
• Utilities: Electricity, water, gas.
• IT and Telecommunications: Software, hardware, etc.
• Professional Services: Consulting, legal, marketing.
How Trace Consultants Can Help:
For businesses looking to review their category management, Trace Consultants can help review category opportunities, identify cost-savings, drive standards and consistency, and align strategy and procurement.
4. Cost Reduction & Spend Analytics
Cost Reduction and Spend Analytics involves analysing spend data to identify variances and anomalies. This allows the organisations to benchmark, identify savings opportunities and improve supplier performance.
At trace. we address these key questions to help review your spend and reduce costs:
1. Benchmarking Analysis - When is the last time you monitored your current spend against market data?
a. Leverage tools to find spending anomalies
b. Compare current spend against historical data, group spend and industry standards
c. Track budget deviations and investigate root causes using AI & machine learning
2. Scope & Rate Review - How often are scopes and rates reviewed to align to the business’ strategy?
a. Identifying services to scale down or eliminate
b. Supplier management - Renegotiating terms with suppliers for better rates & service
c. Market analysis – leverage scale via benchmarking and leveraging bulk purchasing
3. Contract & KPI Review - What opportunities exist to manage variances and reduce costs?
a. Auditing supplier performance to meet compliance requirements
b. Implementing three-way matching to verify invoices – order, received, invoiced.
c. Use automated technology to reduce errors
How Trace Consultants Can Help:
For businesses looking to reduce costs and analyse their spend, Trace Consultants can help identify cost-saving opportunities, detect spending anomalies and variances, optimise service scope and pricing, and address variances and invoicing errors.
5. Procure to Pay Optimisation
Procure-to-Pay (P2P) is the process that covers all steps from requisitioning goods and services to paying suppliers, ensuring streamlined purchasing and financial operations within an organisation.
At trace. we take a three-step approach to answer key questions that can help optimise your P2P process:
1. How mature is your P2P process?
a. Review the efficiency and maturity of the existing P2P process
b. Compare current process against industry standards
c. Evaluate risks associated the existing process
2. Have contract scope and rates been reviewed for market competitiveness?
a. Review goods or services being procured against specifications
b. Review scope of work against contractual agreements incl changes or additions
c. Review rates charged match agreed-upon rates and validate for market competitiveness
3. What opportunities exist to optimise your P2P process?
a. Identifying key requirements for a technology solution that aligns with business needs
b. Developing a business case to outline benefits of an integrated P2P solution
c. Implementing an integrated P2P solution
How Trace Consultants Can Help:
For businesses looking to optimise their procure-to-pay process, Trace Consultants can help conduct a maturity assessment and gap analysis, identify opportunities for optimisation and uplift processes, and conduct a strategic alignment and operating model review.
6. Contract Performance and KPI Management
A well-defined and well-understood scope of works prevents the risk of service delivery not meeting requirements or intended quality as well as change requests that can negatively impact costs, operational efficiencies & customer experience. Before KPIs are considered, base scopes must be well defined.
How Trace Consultants Can Help:
For businesses looking to improve their Contract Performance and KPI Management, Trace Consultants can help realign and control the scope of work, manage changes in scope, govern contract health and performance, and develop performance metrics and scorecards.
7. Supplier Relationship Management
Supplier collaboration can help drive effective procurement by fostering transparency, innovation, and shared goals, leading to improved cost efficiencies, quality, and supply chain resilience.
There are four key components of an effective Supplier Relationship Management process:
1. Who are your strategic suppliers?
• Identify key strategic relationships to engage in SRM
• Allocate resources effectively
2. Do you have effective SRM Governance?
• Internal governance processes
• Clear ownership of supplier relationships
• Oversight of supplier management and strategic decision making
3. How well are suppliers performing?
• Define and establish key performance indicators (KPIs)
• Develop scorecards to track and review supplier performance
4. Where can a partnership add value?
• Collaborative initiatives for value creation with chosen strategic suppliers
• Operational performance (time-slots, store ready deliveries, labelling, MHE, etc.)
• Define long-term initiatives (e.g. packaging, waste, sustainability)
Effective Supplier Collaboration should drive accountability, be forward looking and consider both service & operational performance.
How Trace Consultants Can Help:
For businesses looking to review their Supplier Relationship Management, Trace Consultants can help define supplier segmentation and strategy, establish performance metrics and scorecards, conduct contract review and optimisation, and develop effective renegotiation strategy.
Interested to learn how Trace Consultants can support your organisation's procurement journey? Contact your local trace. team today.
