Procurement challenge


Procurement’s impact on performance goes well beyond savings. Done right—with efficient operating models empowered by digital analytics and smart tools—it can drive innovation, quality, sustainability, and speed; reduce your risk position; and facilitate resilient supply chains.

With more than 930 procurement projects completed across industries and geographies over the past five years, BCG’s procurement consulting experts know how best to help teams chart a course to buying differently—and better. They blend deep sector-specific knowledge with expertise in procurement best practices—both traditional and new—as well as digital transformation.

Creating Value Requires Enablers and a Strong Data Foundation

Building relationships remains important to sourcing and procurement, but personal experience must be balanced with a rules-based process that uses digitization to speed outcomes and reduce costs. To implement an effective digital procurement strategy—and take full advantage of the opportunities that digital offers—BCG helps sourcing and procurement leaders define the core value that their function brings to the organization.

To identify the investments needed to create value—through increased savings, quality, speed, innovation, sustainability, and risk mitigation—we examine your organization’s strategic priorities and assess its digital maturity.

Using our extensive library of client use cases to speed our work—and tapping into the complementary capabilities of Inverto, a BCG specialty business that focuses on procurement and supply chain management—we then select and run use cases that match your specific needs. The results help pinpoint technology interdependencies and anticipated pain points, which in turn helps shape your custom digital roadmap. To turn that roadmap into reality, we work with BCG GAMMA to select the right digital solutions and BCG Platinion to guide broader deployment.

Using AI to Build Needed Supply Chain Resilience

Procurement’s role in driving a company’s overall performance took on greater urgency in the wake of COVID-19. The pandemic exposed structural flaws in supply chains, making resilience a top priority—even if it leads to extra costs.

Our AI Supplier Risk Monitor tool gives us the end-to-end supply chain visibility needed to proactively identify risks and devise solutions, such as adding backup capacity for production and distribution or re-optimizing inventory. This visibility also clarifies options for diversifying your manufacturing and supply networks; one common solution is to create regional manufacturing and sourcing footprints that are located closer to end markets.


The New Pareto: Focusing on Suppliers Instead of Categories

To deliver value through savings, CPOs in all industries need to cut procurement expenditure substantially and quickly, but the conventional approach of focusing on reductions in category spending is too slow and often insufficient to generate competitive advantage. A more effective approach leverages both supplier relationships and technology and is tailored to each of the following major vendor segments:

    • A-Suppliers. Our innovative 360° Program for A-Suppliers engages the most senior levels—including the C-suite—to get the right decisions in place. The ambition is bold: to double the savings in a partnership mode.
    • B-Suppliers. We push for procurement excellence, an approach that focuses on using the right commercial and technical levers, backed by the right preparation, to cut costs. BCG’s AI Negotiation Coach tool helps make this a reality, suggesting to the buyer the right go-to-market approach and analysis. Over time, the coach—being an algorithm—learns from the outcomes and becomes increasingly strategic and effective.
    • C-Suppliers. Our step-up-to-contribute program harnesses potential savings from the smaller vendors (which tend to fly under the radar) by increasing their visibility and making them contributing partners. Our AI Tail Cutter tool generates an appropriate savings target and steers the communication with an individualized approach.
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    Profit from the Source: BCG’s New Book

    To succeed in challenging times, CEOs must do the seemingly impossible: capture cost savings while achieving additional competitive advantages, including innovation, sustainability, and resilience. CEOs can do all of this by taking what may seem like a surprising step: empowering their procurement function to liberate new value from their top supplier relationships.

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    Meet Our Procurement Consulting Leaders

    Helping Your Organization Reach Sustainability Milestones

    Suppliers must comply with comprehensive legislation and directives involving the environment, society, and economics. But meeting requirements isn’t enough. Leading companies across industries are already pushing beyond mere compliance and working to implement net-zero supply chains.

    To deliver value through sustainability, BCG’s procurement consulting team supports companies in:

    • Translating company targets into supplier targets
    • Defining relevant measures
    • Building the abatement curve with a clear business case mindset
    • Setting up relevant measurement systems
    • Integrating sustainability into procurement’s target operating model and KPI set

    Change Management Is Inherent to Our Procurement Approach

    Change management is critical to ensuring that procurement becomes a source of competitive advantage. It is integral to almost all of our procurement projects. To ensure that results are swift and sustainable, we work side by side with your teams so that they are clear on what digital procurement achieves in savings, sustainability, and competitive advantage. We are here to answer questions, integrate team-specific needs, and overcome pain points.

    Examples of Our Client Work in Sourcing and Procurement

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    Cost Savings

    For a German bank looking to achieve near- and long-term savings in procurement spending, we used commercial and technical levers, yielding an immediate 12% savings. By optimizing the target operating model, we developed 20 additional initiatives in governance, procurement mandate, savings tracking, and other areas.

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    Our strategy for CO2 reduction at a European automotive OEM emphasized procurement practices, focusing on scope 3 emissions under the Paris Agreement as the basis for new CO2 targets. We then outlined the required measures—including timing and cost—and laid out intermediate and long-term milestones.

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    Digital Transformation

    We partnered with an international oil and gas company in Asia to create a roadmap for its digital procurement transformation. After completing our digital maturity review, we identified 11 use cases across strategic and operational procurement, prioritized efforts, and produced a detailed schedule for year-one digital implementations.

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    Operating Model Redesign

    For a large energy player, we conducted a full procurement optimization program that included the design of a new, center-led operating model. The work covered key processes and a capability-building program for teams, generating savings of 10% of addressable spending.


    Inverto: Procurement & Supply Chain Management

    Find industry-specific strategies, consistent implementation, and measurable results

    Explore Our Recent Insights on Procurement

    Green Public Procurement: Catalyzing the Net-Zero Economy

    Public procurement accounts for 15% of global greenhouse gas emissions annually. Because governments can create demand for clean energy technologies, they can have a direct impact on reducing the world’s carbon footprint.

    Christian Schuh on Supercharging Savings with Suppliers

    Christian Schuh shares three strategies companies can implement to supercharge savings with their suppliers.

    Unlocking Value Through Digital Procurement

    How do companies elevate procurement from an administrative operation to a generator of strategic value? BCG's Wolfgang Schnellbächer discusses unlocking profit through digitization of the procurement function.

    The Changing Role of the Procurement Organization

    For procurement organizations, today’s uncertainty has made risk mitigation and cost reduction tougher than ever. Learning lessons from the pandemic will be key to survival and sustainable competitive advantage.

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