Three ways in which collaboration can create procurement transformation
Procurement has been trying to make changes to its processes, priorities and brand identity for years. Our suppliers want us to be more open to contact and implore us to conceptualise out-of-the-box ideas. Our internal stakeholders want us to move faster and let their input play a larger role in supplier selection than merely request for proposal performance. Distributed buyers want speed, convenience and autonomy. Finance wants more savings that they can track all the way to the bottom line, and marketing and human resources mostly just want us to go away.
“But what about procurement? What do we want?”, asks Kelly Barner, Managing Director, Buyers Meeting Point, an online resource for procurement and purchasing professionals.
Procurement wants to have an influential voice in enterprise decision making, whether we express it from a seat at the executive table or not. We want to be recognised for all of our contributions and capabilities, not just for savings. We want to be respected and accepted, and we want opportunities for promotion and professional advancement.
Real, lasting change requires give and take. If procurement is to make enough change to satisfy even a fraction of the wants and needs listed above, we can’t do it alone. This is probably the largest factor missing from procurement transformation efforts: we are trying to change ourselves in a vacuum.
If our goal is to become more strategic by creating increased shareholder value or by contributing to corporate competitive advantage, we need access to shareholders and corporate strategy setters. If we are going to collaborate with suppliers, we need the authority to take a multi-dimensional look at carefully-selected spend categories and play a long-term, relationship-oriented game that isn’t tethered to a savings target.
Without an engaged support network, procurement transformation has little chance of success. In too many cases, others enable us to continue the very behaviours they profess to want us to change.
Behaviour 1: pursuing savings
Procurement or, more specifically, the strategic sourcing process, was designed to optimise supplier selection along the lines of quality and price. It is driven by precisely communicated, standardised demand numbers and product/service specifications. The nature of the comparison and negotiation process is to see which supplier(s) can meet the business’ needs at the lowest cost. And, while many people, including those of us in procurement, bristle at projects that emphasise savings, savings continue to be a critical output of systematically-managed spend. If efficiency is not a priority, strategic sourcing may not be the way to manage spend. Most companies play in markets that require a competitive edge. We may not like it, but cost is still a very important consideration for the majority of contracts.
Behaviour 2: supplier selection
How many times does a stakeholder get upset because they approach procurement with a supplier they ‘know’ is the right partner and we insist on doing research and sourcing anyway? How would that same person feel if the supplier failed to meet expectations, went out of business or turned up on the front page of the newspaper for some horrible ethical breach? We all want to feel more entrepreneurial, but the reality of entrepreneurship is that it is high risk and sometimes terrifying.
When spend and suppliers look easy to manage because most of them are managed through procurement’s proven processes, it isn’t an indication that spend and suppliers are easy to manage. Rather, stakeholders may need a reminder about just how much is at stake each time a contract is signed. Having another set of eyes on each decision might mitigate their risk exposure or, in the worst-case scenario, help bear the weight of the blame.
Behaviour 3: spend oversight
Functions that manage to hold on to some portion of their spend outside of procurement’s purview and authority may think that they have the right to do so based on their unique expertise. They are, however, forgetting one crucial detail: it may be in their budget, but it isn’t their money. I prefer the phrase ‘budget holder’ to ‘budget owner’ for this exact reason: they are stewards of a resource that is not their own. Anyone with this level of responsibility should welcome, not shun, managerial oversight – especially from a well-trained team of internal professionals that want nothing more than for them to accomplish as much as possible with a fixed set of resources.
Plenty of people – including procurement itself – have lots of complaints about procurement and ideas about how we can improve. But we shouldn’t ‘throw the baby out with the bath water’ as the old saying goes. Every function and every job have fun parts and difficult parts. Procurement can become more user-friendly, more automated, more skilled and more creative, but we can’t ever – nor should we want to – escape the importance of our core mandate: to guard the use of corporate resources and to ensure that our supply partnerships generate value rather than increasing risk.