Changing the close-minded nature of a stakeholder to the value of procurement is a big challenge. But procurement isn’t beaten yet.
Have you just started following this series of posts? Don’t miss the first two! I’ve been sharing my perspective on procurement productivity and efficiency from over four decades worth of experience in the field. Catch up here on Part 1 and Part 2.
If you’ve ever met me, you’ll know it is in my nature to look forward. I’m always trying to figure out what is likely to come next for a profession that has already seen so much change.
Although most of the time we consider savings as the primary procurement performance metric, our core focus should actually be on spend and what it can accomplish.
In my first post, I suggested that the total number of annual procurement hours is a fixed resource that must be maximised if we are going to approach our full potential. The same is true of spend.
A company’s total annual (or budgeted) spend is fixed. Simply shrinking it is a limited view of procurement’s impact, and one that has gotten us in trouble in the past for being overly cost-conscious.
Expanding View of Spend Management
In order to really influence spend under management, we need to back up or expand our view of the spend management process. Starting with eSourcing and moving forward is too late. By then, a significant opportunity to impact the category has already been passed.
The supplier discovery process – as reimagined by the team at tealbook, for instance – contains all of the value potential uncovered in downstream processes. While it might seem like more work to broaden the pool of prospective suppliers, it’s actually procurement’s best change to affect results by more than a shade or two at a time.
All measurements (savings, spend under management, etc.) need to drive meaningful improvements in results. They can’t just capture activity, and no measurement exists for its own sake. Because of the seemingly contradictory nature of the metrics in play, procurement is sometimes in the position of having to reconcile long term strategic value creation with short term business requirements.
In the face of this challenge, we have to make working the ‘right way’ so easy and intuitive that people don’t have an incentive to fall back on their old habits.
Importance of the Right Price
Procurement has successfully overcome a savings-driven mindset. It is time for us to help our internal stakeholders overcome a status-quo mindset. I have been in situations when an internal stakeholder tells me something along the lines of, “This is an area where we aren’t really concerned about what we pay.”
And while we need to be careful not to alienate someone by beating the ‘savings drums,’ this is a prime opportunity to educate, and to explain why it is important to get the right price regardless of what is being bought.
Each dollar spent has the potential to create varying levels of value. Not being worried about what you spend in a particular category or on a specific product is one thing. But what if you could accomplish more with that same dollar? Maybe there is a more innovative supplier or a next generation product available?
If a company’s doesn’t open their mind to what is possible, and investigate qualified alternatives, they condemn their potential to the bounds of the past.
tealbook allows companies to pursue inquiries like these without holding up the project timeline. In fact, an internal stakeholder can search the suppliers themselves if they like. They may even uncover new potential sources of supply that match their definition of desired value.
Shifting the Stakeholder Mindset
This mindset-shift is a challenge that the procurement community as a whole can stand up and address together.
Procurement pros are notoriously conservative in their sharing habits. While this makes a lot of sense in specific cases, any opportunity to contribute to, or benefit from, aggregate industry intelligence may be just the cure we need to closed-minded stakeholders and the frustration they create.
I have been around a lot of different procurement and purchasing groups, and they get all worn down. I’ve seen unbridled energy and excitement degrade to the point of becoming a lack of professional engagement.
When we don’t set up the true mission of procurement right – maximising the value of every dollar spent – it’s not a fun place to work. But hope is not lost. Procurement is not done innovating.
Catering to business clients is a big role for procurement. We need to draw those clients into the process and make it easy for them to understand the real meaning behind differentials in cost. Not just in terms of savings, but also in terms of what the spend can accomplish for the company. Ultimately, this will carry procurement forward to the next phase of our development.
And that is something I can hardly wait to see play out.
Gregg Brandyberry is a recognised pioneer in procurement and sourcing technology. He has over 40 years experience in industries such as automotive, textile, manufactured goods, electronics and healthcare.
He is the former Vice President of Procurement – Global Systems and Operations for GlaxoSmithKline, and a Senior Advisor for A.T. Kearney’s Procurement and Analytic Solutions organisation.