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4 Reasons You Can’t Ignore Procurement Any More

By  Charles Clark  on  11 Jul 2012
  • Procurement Strategy
  • Cost Savings

Procurement has a vital role to play in every business. Unfortunately, most employees don’t appreciate the value they bring because what they do is often hidden away from sight.

The secret is that procurement has more influence and creates more value-add than any other department in your organization - if it is at the heart of your operation. When procurement is front and central, an average performing company is turned into an Olympic medallist.

Does it sound too good to be true?

To convince you, here are four ways procurement can and should influence, support and drive your organization forward.

1. Risk management

Issue: Every business is concerned about risk, and how to minimize its risk profile. This includes predicting where risks may lie in the supply chain and beyond, and ensuring that the right strategies are in place to successfully address them using contingency plans.

Procurement can help risk teams develop contingency plans by sharing business critical insight using tools already in place such as spend analytics which will help you identify and mitigate a range of supply chain issues.

In partnership with procurement, risk teams have the visibility to continuously evaluate and make proactive risk decisions, such as switching suppliers if one shows signs of bankruptcy or choosing a back-up supplier if a manufacturing site is affected by a natural disaster.

2. Cash management

Issue: Given the view of procurement as transaction-masters, it shouldn’t be too much of a shock that they play an important role in helping finance control costs by getting spending under management.

Procurement can help finance find cash savings by tapping unexamined spending categories. Using the information that procurement already utilizes to manage suppliers, finance can also look at payment terms to assess the cost of paying suppliers early.

Finance teams, with support from procurement, is able to quickly implement company-wide cost containment programs which won’t jeopardize key supplier relationships.

3. Knowledge management

Issue: Perhaps the least-known string to procurement’s bow is the level of insight they bring to an entire organization. No longer is procurement tactical – it has gone strategic.

Procurement can help senior executives make smarter decisions by accessing new levels of information locked in other parts of the organization. By pushing and pulling this information up and down and across, business leaders are breaking down silos between department resulting in better communications and more efficient running of day-to-day operations.

As a result, the entire organization has the insight and knowledge to bring better products to market (developed together with suppliers and customers), outmanoeuvre competitors, and deliver greater internal efficiencies.

4. Technology

Issue: Procurement professionals are excellent shoppers – their job is to find deals; and the only way to do this successfully is by knowing what is on offer in the market.

Procurement is well positioned to advise IT teams of the best, future-proofed solutions to help their organizations achieve strategic goals. What is required is for IT to exploit the knowledge centers procurement teams have built up over the years about suppliers and the goods and services they sell.

Together, procurement and IT will shortlist examine and buy the best technologies using tried and tested methods including benchmarks to determine the best value.

Next steps

In the best-run organizations, procurement has been elevated from the basement to the boardroom – helping the entire business become aligned through the constant flow and exchange of information and knowledge historically kept in departmental silos.
To put procurement at the heart of your organization, there are two questions you should ask yourself:

  • If you’re not sure how procurement can help you in your role, it’s a sign to engage procurement so you’re working together – not against each other – toward shared business goals.
  • If you’re procurement, and you don’t have strategy review meetings scheduled this week with the heads of departments, it’s time to re-engage your organization to show your value.