SGS Maine Pointe's Matthew Lekstutis on the power of strategic procurement

Matthew Lekstutis, CEO of supply chain and operations consultancy SGS Maine Pointe, in a recent Chief Executive article explained how strategic procurement can help leaders drive sustainable growth.

The article – "2024 CEO Strategic Roadmap: Elevating Procurement Excellence For Sustainable Growth" – argues that strategic procurement has become an important lever that enables CEOs to control spend and drive value creation amid market challenges.

Lekstutis says strategic procurement emphasizes end-to-end collaboration and identification of cost savings with well-chosen suppliers, while offering spend visibility that mitigates price variability.

In strategic procurement, suppliers become “allies” that are aligned with company goals. Strategic allies can suggest ways to innovate, such as more cost-effective materials; offer price concessions by committing to higher volumes; and link their strategies to purchaser product pricing models to optimize margins.

In pursuit of strategic procurement, leaders also have to strengthen their supply networks. This includes fostering resilient connections with suppliers in compatible global economies and finding suppliers that can align on ESG and technological priorities. That may mean willingness to obtain ESG certification and install compatible tracking systems.

Companies should also aim to diversify supplier base across different regions to mitigate risk and eliminate single-supplier dependency. They should also embrace a spectrum of logistics options (including the potential of 3PL suppliers) and instill cross-functional accountability and strong governance practices.

Leaders can also benefit from technology, Lekstutis says, though finding technologies and technology partners that fit that company’s goals can be difficult. Successful implementation, however, can lead to benefits such as AI-powered analytics to identify risks, trends, and optimization opportunities – as well as enabling better-informed decision making.

Companies should have a repeatable due diligence process to evaluate and integrate new technologies, as well as simulation models to test proposed changes.

Finally, CEOs should be capitalizing on market headwinds – including realigning cost structure and renegotiating with their supply base. Lekstutis says supplier agreements should have index-based tracking and pricing transparency. CEOs should also have a sales, inventory, and operations planning process in place to help balance supply and demand.

Strategic procurement has yielded tangible benefits for companies, Lekstutis says. In one case, a financial distressed manufacturer saw a 45% improvement in Ebitda and a case impact of $1.9 million in year one. In another case, a chemical company saw $18.6 million in procurement savings and $4 million in logistics savings.

“Strategic procurement is not just a strategy, it’s a competitive imperative,” the SGS Maine Pointe chief executive concludes. “CEOs who drive its implementation will position their organizations for sustained growth and resilience.”