Procurement organizations have been struggling with two key challenges over the last decade:
There is, of course, no easy answer. If there were, I suspect you would have figured it out by now. There are, however, ways of re-framing and re-positioning procurement capabilities rather than just the procurement function to enable a different dialogue and ultimately a more relevant value proposition.
It’s easy to see how we got here as a function, we have spent much of the last 20 years advocating for this function we call procurement to own key areas of the business. We should own the suppliers, we should own the sourcing, the negotiating, the contracting. Only we have the skills to do this properly. We’ve argued that it’s not about savings (although we strangely keep coming back to that emotive topic at every turn) we’ve argued it’s about compliance and risk management and supplier innovation. And in doing that we have built, wittingly or unwittingly, a silo all of our very own.
The answer, or part thereof, of the two questions posed at the top of this article is to exceed at the second one and, in so doing, at least, change the silo into a something more recognizable to our business partners as a competitive advantage, something to be engaged with because it helps us sell not avoided because it gets in the way.
One key area we need to focus on is how we look at ‘value’. What does it mean to our business versus what does it mean to our function? When I look at the various indices that are produced to show who is top of the pile in procurement or supply chain, I usually see a set of functional values with measures against them. Things like ‘cost to procure’ or ‘transactional automation’, I rarely see anything that would be meaningful to a sales director or more importantly to your company’s’ customers.
So you can see where I’m going, we need to think more about commercial value and what we can do as procurement professionals to influence this and find different ways of managing the operational functional values that might be needed but perhaps shouldn’t be front and centre of your modus operandi.
As businesses struggle with the increasing pace of change, there is little room left for siloed behaviours or for functional objectives for their own sake. Everyone in a business should be cognisant of where the revenue comes from and how they can help drive and sustain that revenue in line within the regulations that surround us.
It’s no longer good enough to hide in your cubicle and think that that is what the sales and marketing folks do. You need to be out in front of the commercial realities of your business and thinking about how your skills and capabilities can add real opportunity into your sales processes. More than one CEO has said to me that ‘you can’t save your way to success’ and, of course, they are right.
In my career, I have worked on both sides of the fence, in procurement leadership as well as in business development and sales. When you make that crossing from poacher to game-keeper, if you will, you realise that there is an awful lot of commercial opportunity and value sitting right there in the supply base.
I see value being created in three key areas:
In the upcoming webinar I will be talking more about this relationship of supply base to customer and how as Procurement professionals we have far more ‘value’ to offer and far more ‘value’ to deliver if we can re-set our goals and re-align our intent.
About the author:
David J Ward is a Supply Base Management and B2B relationship expert. He has spent over 20 years in Procurement Leadership roles as well as Business Development and Sales. His work has taken him into some of the largest organisations in the World and across many different industry sectors. He is at his best when challenging norms and applying disruptive curiosity to difficult business problems. David focusses on capability development and how organisations build skills and competencies rather than functions and silos, he is driving the thought leadership agenda on digital Procurement and Supply Base Management. He can be contacted at firstname.lastname@example.org.