How can procurement teams serve their organisations better?
Being a procurement professional can be challenging. The role requires individuals to vet contracts, pricing and supplier relationships. But the bigger picture is that procurement should be the eyes and the ears of the organisation when it comes to how much money is being spent.
Procurement teams need to ask themselves the questions – what value can be added here, what problems are we trying to solve?
In an ideal world anyone working in procurement should be adding shareholder value, making an impact on the business’s return on investment, increasing social responsibility, driving innovation, enhancing the organisation’s reputation and mitigating risks.
As professionals, we want to enhance our company’s reputation and manage risk
While I have been in the industry for more than 25 years and I assume that this is what drives CPOs, I’m not the only one. Recent research conducted by Harvard Business Review Analytic Services confirms it, with 55% of respondents saying that ethical and commercial considerations are equally important when evaluating suppliers.
But how could procurement professionals know it all?
Procurement leaders are not soothsayers. Nor are they mind readers. The only way they can possibly serve our organisations effectively is if they know what’s happening – the answer lies in having greater transparency of spend. Again, the HBR survey agrees: 90% of executives surveyed indicated that increased business transparency leads to better-informed decision-making across the entire organisation.
What’s stopping procurement from serving the business quickly and efficiently?
Something is holding procurement teams back. That something is a combination of outdated processes and siloed technology that prevents procurement from seeing the bigger picture.
In some instances, manual processes are providing incomplete data or data that is woefully out of date. In others, a lack of support from top management, finance or legal teams is hampering procurement. And sometimes the technology is there, it’s just too siloed to be valuable.
In short: the lack of connectivity between those responsible for sourcing, procuring, paying and reporting on an organisation’s financial transactions is preventing procurement leaders from being able to do what we know they should do, what they want to do and what they believe it is vitally important for them to do.
So how do they move from a situation where, at best, procurement professionals are seen as the naysayers of the business towards an ideal world in which procurement is proactively managing supplier risk, driving innovation and improving shareholder value?
Change the way businesses connect, and the way they buy
It’s time to reimagine the buying ecosystem. Imagine if, instead of having an adversarial, competitive relationship with suppliers, procurement could actually build strong emotional connections for the benefit of both parties? It’s possible.
And, if it works, the entire procurement-supplier relationship will change to provide better results, for more impact, greater transparency and increased shareholder value. And it can all happen faster, more efficiently.
It’s time for change
Quite frankly, the world has changed. Procurement teams who simply think their role is to reduce costs or ‘drive a hard bargain’ in a way that compromises supplier relationships may very well no longer have a job in 10 years’ time. Changing the very nature of the procurement function and its business impact isn’t a ‘nice-to-have’, it’s a ‘must-have’.
But it’s not just up to procurement teams to change this.
Procurement does not operate in a silo. As the impact of the coronavirus expands across the world it becomes increasingly obvious that managing suppliers in isolation will not solve bigger problems. As those who buy and procure goods and services, procurement doesn’t just have a responsibility to our organisations: it has a responsibility to know about every touchpoint along the supply chain.
The answer lies in collaboration
There are already pockets of people who do it right: who share information willingly, who build supplier relationships for the benefit of all parties and who understand the data behind the data.
They deserve to be supported in this change.
It’s time for suppliers and technology providers, for vendors and innovators to join forces and make procurement of the future a business unit to be proud of.
Technology providers need to come in with a collaboration-first mindset and then make a commitment. Vendors should be saying, ‘This is what we think you need, this is how we’re going to solve that problem, and this is the ROI this solution can deliver.’
To improve connectivity within organisations and between procurement and suppliers we need to put collaboration first.