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Three decades ago Chinese economic reforms created a global economic powerhouse. Many Chinese firms took advantage of the ensuing boom, but, with competition intensifying, economic growth has slowed. Now, Chinese enterprises need to find new ways to compete in a world-class arena while demonstrating the highest level of skills.
Accenture believes competitive advantages lie in procurement mastery. The opportunity for Chinese organizations to create value through more effective procurement is immense. Our research shows that those Chinese organizations with the most advanced sourcing and procurement capabilities achieve 50 percent higher cost savings on every billion dollars spent than organizations with lower level skills.
Chinese enterprises that have enjoyed a boom period at home and abroad now face increasing business pressures around rising input costs and the need to produce higher value goods. The correct response lies in improved procurement. Mastering procurement will allow state-owned, multinational, and private Chinese firms to advance competitiveness domestically and internationally.
Our research illustrates that while Chinese organizations have developed a high level of procurement skills in a number of areas, several gaps still remain. These gaps represent significant opportunities for value creation. Some of the biggest opportunities are in:
Establishing a strong focus on value delivery.
Building more centralized procurement operations.
Increasing the focus on sustainability.
Establishing a mature risk management system.
Adopting a partnership approach with suppliers, focusing on win-win outcomes.
Focusing on training, procurement skills and talent management as procurement becomes a strategic function.
To achieve procurement mastery, Chinese organizations must develop and maintain a high level of skills across six dimensions:
Procurement Strategy. Transform indirect material and service management capabilities, centralize procurement, implement a broad risk framework, and develop a sustainability strategy.
Sourcing and Category Management. Focus on strategic activities’ analysis, Total Cost of Ownership (TCO) management, and procurement risk analysis.
Requisition to Pay. Invest in efficient end-to-end procurement processes and develop tech-enabled assisted buying channels.
Supplier Relationship Management. Emphasize information visibility in key collaboration areas, realize value with strategic suppliers, and work with suppliers to support an enterprise code of business ethics.
Workforce and Organization. Shift from transaction-based to high-value activities, stop rotating procurement resources and focus on building deep capabilities, and invest in talent management.
Technology. Deploy integrated technology platform for sourcing and procurement, implement a unified master data management system for shared visibility, and understand the value of analytics.
October 25, 2013
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