The business could benefit from seeing procurement’s value in a new light. The challenge is getting people to accept the change.
In my previous article, I discussed the struggles procurement faces with the perception of its value. One of procurement’s key issues is that, in most cases, the cultural focus is on cost savings.
This driver is linked to the four key stakeholder groups that procurement must answer to – the CEO; business leaders; the supply chain; and the CPO.
Because culture is handed down from the CEO, the culture of savings flows down through the business and the supply chain. This can lead to business leaders and the supply chain attempting to bypass procurement. This is where the perception of value of procurement is critical.
However, all is not lost! With the stakeholder requirements in mind, we can propose an alternative cultural model that will drive benefit for all four groups, plus procurement itself.
Procurement’s Future Culture
The key change in the future culture, from the culture we have now, is that it turns the key drivers on their heads.
- In the new structure the number one driver for procurement is the supply chain.
Procurement focuses on collaboration, innovation and becoming a customer of choice. The relationship is built upon mutual benefit and trust. It involves procurement becoming a business partner and promoting the suppliers capabilities and successes.
- The number two driver is the business leaders.
Procurement brings new ideas and opportunities into the business from the supply chain, resulting in procurement being recognised as a trusted advisor to the business. The business supports procurement’s focus on mutual success, collaboration and becoming a Customer of Choice.
- The third driver is the CPO
The business leaders complement the CPO on the great value their team brings into other business areas. The business leaders desire procurement’s involvement in their areas of business and identify them as trusted advisors.
- The final driver is the CEO
The CEO has heard about the added value procurement delivers into the business and the success it is achieving. The CEO’s main focus for procurement is to retain the value they are bringing into the business from the supply chain.
The Procurement department is still a cost centre, but cost takes second priority to the value being generated for the business.
By re-aligning priorities, we have created a culture that meets the needs, and addresses, all four groups. The new culture also takes procurement away from the perception of being price focused, to becoming a value add for its stakeholders and customers.
It is what, for many, has become the nirvana of what they desire procurement to become.
Where’s the Evidence?
The next question you may have is, how do we know this is the right direction?
Some of you may already know of Johanne Rossi who won CPO of the year 2016. In an article posted on Procurious website in June, Johanne talks about what she did to make her Procurement department a major success within the business.
Here are a few extracts from the article for you to think about:
- “re-structuring…teams in new ways to better partner with stakeholders and supply partners” – we are seeing the first evidence of partnering with the business
- “A procurement innovation manager has been hired to achieve benefits…such as finding new, mutual value with supply partners through innovation and efficiencies.” – the key word is mutual
- “Building internal and external relationships, and developing stronger business and commercial skills.” – a focus on developing procurement’s commercial skills
- “The entire focus for us is to become the customer of choice for our suppliers” – this is the killer quote. It underpins a model of building trust, collaboration and promoting joint success.
Johanne’s full article on Procurious can be found here.
Re-aligning Attitudes to Change
We have outlined a culture where many procurement individuals find themselves trapped today and offered an explanation why it occurs. We have gone on to provide an alternative model for driving culture and value, one that could bring significant benefits to both procurement and the organisation.
To undertake this re-alignment, it may require attitudes to change and potentially re-building supplier relationships. For some people this may be a step too far.
An alternative path is for procurement to remain as it is, but then don’t be surprised if your department becomes fully automated and you’re out of a job. You were warned!
To undertake this journey requires a re-assessment of procurement principles and drivers, with a greater focus on the desired outcomes from the engagement with all stakeholders.
Procurement has a magnificent opportunity to become a critical business function for an organisations success within 21st century markets. The question is, do you want to be a part of it?
“It is never too late to change. The issue is deciding if you want to.”
POD Procurement is a consultancy and advisory for Procurement Transformation. For more information, and to read more about the POD Model, visit our website.