Sourcing and contracting play a crucial role in procurement. Sourcing involves identifying and evaluating potential suppliers, and selecting the ones that can provide the best quality goods or services at the most competitive prices. Contracting, on the other hand, involves negotiating and finalizing the terms and conditions of purchase with the selected suppliers. These terms include price, quantity, delivery schedule, and payment terms among others. Both sourcing and contracting are aimed at ensuring that the organization gets the best value for its money.

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Procurement and Strategic Sourcing

The procurement process can be tough to handle. Use our Procurement and Strategic Sourcing presentation to develop the action plan you need to achieve...

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After these puzzles were solved, the IBM team came up with the following procurement solutions: master data management, analytics and insights, sourcing and contracting, content management, order management and helpdesk and payables. The new procurement process allowed IBM to deliver $67 million in savings in the first year, reduce procurement costs by 13% and achieve an immediate four-point improvement in Net Promoter Score (NPS).

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Procurement solutions like master data management, analytics and insights, sourcing and contracting, content management, order management and helpdesk and payables can have various practical applications in different industries. For instance, in the manufacturing industry, these solutions can streamline the supply chain, reduce costs, and improve efficiency. In the healthcare sector, they can help in managing medical supplies, reducing costs, and improving patient care. In the retail industry, these solutions can help in managing inventory, reducing overstock and stockouts, and improving customer satisfaction.

Other companies can implement similar procurement solutions to achieve cost reduction by adopting the following strategies:

1. Master Data Management: This involves managing the organization's data as a single coherent system. It helps in reducing errors and improving efficiency.

2. Analytics and Insights: Use data analytics to gain insights into spending patterns and identify areas for cost reduction.

3. Sourcing and Contracting: Establish strategic relationships with suppliers to negotiate better prices.

4. Content Management: Efficiently manage procurement documents to reduce time spent on administrative tasks.

5. Order Management: Streamline the order management process to reduce delays and errors.

6. Helpdesk and Payables: Implement a helpdesk to resolve procurement issues quickly and efficiently manage payables to avoid late payment fees.

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