Productivity is often defined as being a step that relates a quality or quantity of output to the inputs necessary to achieve them. Getting longer for the same or more for less are two methods to show a gain in productivity. 1 question for Procurement teams is the way to show they are continuing to enhance their productivity.
1 answer lies in the Idea Of the maturity stages for Procurement. A normal procurement group goes through five evolutionary stages, making more value as it moves from one point to the next. This value is the output from the group and the price of the group is the input signal. This means that if you are able to demonstrate that value is created at a faster rate than the price of this team then you have shown increasing productivity.
Here are the five phases of Procurement maturity and the way each creates value.
Stage 1 is Supply Assurance. This is the most elementary stage of adulthood and its objective is getting the perfect products and services at the ideal time and place. The action for achieving this can be largely administering processes for buy orders and contract letting. Its objective is ensuring supply.
Stage 2 is Price Management. The next stage focuses on getting the perfect goods and services at the perfect price. This can be expressed in terms of economy. If you can find the essential item at the quality necessary for a lower price then you have succeeded.
Stage 3 is Price Management. The Previous phase usually uses mro industry forces to create the competition that drives prices lower. This works where there are lots of providers and in which markets are perfect in other words all providers know what they want to know at precisely the exact same time. The prices which are attained by competitive tendering often only provide relatively tiny savings because few niches, if any, are ideal. This phase works with key providers and uses techniques such as Lean, Six Sigma, value analysis and value engineering to discover ways of reducing costs so that providers can significantly reduce costs and still make a decent profit.
Stage 4 is Demand Management. In this stage you begin to link together the requirements of the customer or end user with the capabilities of the supply chains that provide them. The focus is on reducing demand action, complexity and variability. This phase is often also referred to as category management.
Stage 5 is Value Management. The best phase of procurement maturity is known as value management. This is where you and your providers engage in true transformational change, asking questions about how to change value chains to provide exceptional benefits for all stakeholders.
