In a world where cost-savings are no longer king in procurement, how can the function demonstrate its business value and earn a seat at the table? Jaime Mora talks upgrading your procurement mindset!
In recent years, our organisations have gotten a better understanding of the valuable contribution Procurement can deliver to the business.
And yet, there remains a feeling that the function has not yet reached its full potential. Procurement is certainly a relevant and appreciated corporate function. But we’re not yet sitting in the C-Suite…
As procurement professionals, we unanimously agree that the function should be elevated within the business, but convincing those at the top is easier said that done. Whilst all organisations consider implementing cost-savings to be a crucial part of business success, it’s no longer regarded as a strategic process or a competitive advantage. Leaders are becoming increasingly aware that savings alone will not distinguish them against their competitors. As such, procurement can be dismissed within the business as a less important function.
The bottom-up approach
If traditional procurement contributions are not at the top of an organisation’s agenda, how can procurement earn its place in the C-Suite?
It’s difficult to find a “one size fits all” recipe but we could start by upgrading our procurement mindset. I propose that we rebrand ourselves as: “External Competitive Advantage Strategists.”
But what on earth does that mean?
As it stands, we’re pressured into taking a bottom-up approach to our work. We know we have to bring savings to the table, we achieve this, and only then do we start thinking about the other nice things we can do with our time; innovation, sustainability, supplier development etc. And we deliver on those things too.
It makes sense that the more value-adding contributions we make, the more arguments we have to justify a spot, and a voice, at the highest levels of the organisation.
But in reality, we end up doing bits and pieces here and there, following trends and simply trusting our gut.
Taking this approach is one of the reasons that procurement objectives and output may deviate from actual business goals.
Taking a top-to-bottom approach
If we truly want to step up our contributions, we should be taking a top-to-bottom approach. Our organisations operate in highly competitive environments, where sustainable advantages are required in order for us to outperform our competitors.
Procurement is uniquely positioned in the business given our access to so much information from our supply networks and an awareness of the opportunities here. We’re in the perfect position to source more than just products and services – we can actually source competitive advantage.
Procurement is capable of seeing things strategically. We can analyse where our organisation stands in a competitive environment and we are capable of both meeting our business targets and identifying where and how our organisation could compete better. To take a holistic approach, this should be complemented with strategic analyses of our suppliers.
As I mentioned at the beginning of this piece, cost-savings will always be appreciated. But procurement’s work should never be limited to that. The new approach to procurement is about sourcing the external competitive advantages on offer to give our organisation unique advantages in a competitive environment.
Imagine the following scenario: one of my organisation’s strategies is to develop its people. From my knowledge of the supply market I know a particular supplier that is uniquely skilled in people management and development and this makes them the most competitive supplier. We have the power to bring this supplier to the table; to initiate the discussion to build a partnership and leverage the supplier’s competitive advantage, or even a vertical integration. Boom! Now Procurement is sitting at the M&A table.
As saving becomes a commodity and not a priority, it is time to reinvent procurement. Leave the Procurement Manager title behind and become a External Competitive Advantage Strategist!