When making a purchase, consumer law states that the goods you buy must be fit for purpose..
This blog has been developed and published for Procurious by Proxima.
In short, this means that any goods that you purchase must be able to perform the tasks or functions that they were designed to be able to complete. But, in the wider sense, fit for purpose is also a term used to describe anything (including a business function) that is able to deliver its objectives and provide a satisfactory level of service.
Is your procurement team fit for purpose?
So what constitutes a satisfactory level of service when it comes to procurement? Is a procurement team that focuses solely on squeezing suppliers on price, continually driving bigger and bigger savings (but alienating its suppliers in the process) a satisfactory function? We think not.
Don’t get me wrong – there is no denying that a good procurement team is one that is able to meet savings targets, but a great one, well that’s slightly more complex. A great procurement team is one that recognises the importance and impact of its supply base on its own corporation’s operations. One that collaborates with its suppliers, coaching, motivating and incentivising them all towards the goal of creating a fully engaged supplier base aligned with, and able to contribute towards, the organisation’s wider corporate aims.
By this definition then, there are an alarming number of procurement functions even within some of the world’s biggest organisations that are not fit for purpose.
And with an average of 70% of a businesses’ revenues spent on suppliers, that’s a significant amount of spend that is likely not being used to the best of its ability.
Making the change
Clearly then, ensuring that your procurement team is fit for purpose, can have a dramatic impact, not just on the way that your suppliers view your organisation, but on profitability.
Below are 3 simple tips to ensure your procurement function is fit for purpose:
- Upskill your procurement team: With two-thirds of CPOs still citing lack of resource as one of their key challenges, it’s no surprise that the trend towards upskilling is an increasingly popular one. As a recent panel of industry experts discussed, the procurement team of the future will be one that encompasses a diverse set of people from various backgrounds, with a large and varied skill set.
- Communicate value upwards: Procurement professionals are no stranger to the often negative perceptions associated with the function. Overcoming this perception problem starts with communicating its true value. Sharing various achievements (outside of savings metrics) in the form of supplier-led innovations or mitigated risks with the wider business will help shift perceptions of procurement away from that of the “savings guys” toward that of a key business function capable of contributing to the corporation’s wider aims and objectives.
- Become a strategic partner to the wider business: A recent piece of research by The Hackett Group highlighted that “elevating the role of procurement to a trusted advisor within the business” was the key issue for procurement in 2015. How can this be achieved? Communication is key. Take the time to approach business leaders throughout the organization and learn about their challenges and strategies. By taking the time to listen to other business functions and understand what they need from procurement, you encourage the perception of procurement as a strategic partner.
So, in short, ensuring that your procurement team is fit for purpose is a complex, but achievable task. By taking into account these suggestions for expanding current capabilities, communicating achievements and aligning with the wider corporate agenda, you can elevate your procurement team beyond its conventional role – creating a function that is not just fit for purpose, but one that excels.
What steps are you taking to get your procurement function fit for purpose? Are you building the procurement team of the future or concentrating on changing negative perceptions of the function?
Proxima is a procurement specialist, offering a different approach to in-house sourcing, through close collaboration with clients across a number of industries including manufacturing, retail, financial services, engineering, FMCG, professional services and the public sector.