How to get to 100% value creation from procurement

As procurement professionals, what do you think your suppliers think of you – and do you care?

Do they see you as a hard-edged negotiator who wants to strike the best deal, based on price alone? Or do they see you as relationship-driven, keen to create more visibility within the business and developing inter-dependent relationships with your supply base?

Hopefully you want to be seen as the latter, but are the systems and tools you have in place sometimes working against you? Asks Gary Noble, joint managing director of 1st Executive, an international procurement and supply chain recruiter.

We have come across several instances of e-procurement tenders to supply procurement staff where it appears that decisions are made purely on price, as feedback on an unsuccessful bid has told us that no marks were allocated for a specialisation in procurement. Surely that just means a race to the bottom and a compromise on quality?

So, what’s the answer?

I was listening to an interesting presentation by procurement digitalist Bertrand Maltaverne, who suggested that sometimes procurement can hide behind a process or a piece of technology and forget that business is about relationships with people.

Maltaverne also suggested that if procurement wanted to be seen as a strategic function by stakeholders then it also needed to look at the value it adds and communicate that effectively.

We come across many procurement functions which are doing just that – winning the hearts and minds of the key stakeholders and recognising the value that their supply base can offer over and above price – but it is by no means endemic.

So why is this? According to Nick Jenkinson, senior procurement director at Astellas Pharma, it is because we are not focusing on 100% value creation. At a recent conference, he talked about how procurement functions often bring in great talent and then are comfortable with them undertaking activities that are effectively non-value add.

If we want to get to 100% value creation Jenkinson says that the first thing to do is to look at how procurement truly creates value for the business. Once the value proposition is clear, he says that it is then about focusing purely on those activities that support that value creation – and removing those that do not by automating them.

That way the core function of the procurement role becomes 100% value creation.

Wise words – and it looks as though technology will play an ever-increasing role in the procurement functions of tomorrow – we already have robotic process automation, while cognitive procurement and AI is coming.

If Jenkinson’s vision becomes reality then it does look as though there will be a real recognition of the value that procurement adds both to the top and bottom lines of a business.

A final thought

Let us not forget the human element and let us remember that whatever is being sourced, particularly if it is talent from a supplier like ourselves, there is only so much that can be automated.

If your suppliers have deep specialisations in your market then make sure your e-procurement system is not deselecting them based on something it does not understand.

Because if you do not get in the right talent, then the vision of 100% value creation is unlikely to ever become a reality.

Originally posted on SupplyManagement

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