Procurement needs to shake its 'bad guy' image and be recognised for the value it delivers
We are living in an unprecedented moment of disruption to global supply chains. Lorry parks at Manston airfield and the EU's blunder over the Northern Ireland border are just the latest chapter after months of turmoil kicked off by the closure of factories in China almost 1 year ago.
Until then we’d enjoyed relative stability and confidence in global supply lines. Today, Procurement Teams are fighting harder than ever to keep their businesses moving. Never before has there been such intense focus on the importance of Procurement in preserving business continuity. And yet despite its importance, rarely does Procurement get a seat at the board table or a mention in the annual report.
Every sales conversation I’ve ever had with a prospective customer has painted their Procurement team as the “bad guy”; a barrier that prevents engagement, stifles innovation and slows down commerce to everyone’s frustration. My typical instruction from a buyer would range from, “Don’t worry about Procurement, I’ll find out how to shortcut the process,” to “Procurement are being a nightmare, so we’re going to get started without them.” Hardly a ringing endorsement of the value that Procurement is supposed to provide!
Procurement sits at the critical executional fulcrum of the organisation, geared to optimise supplier selection to balance Spend, Risk and Quality in the delivery of critical goods and services vital to the company’s ability to deliver value for its own customers.
As the business scales and increases its spend across a wider base of suppliers, Procurement helps to keep things in control. But it operates subservient to its neighbouring business functions:
Spend, a critical KPI of the procurement exercise, is a target controlled by Finance tied to a broader strategic imperative to drive bottom-line growth.
Quality, another key factor in procurement decision-making, is a measure ultimately determined by the buyer (e.g. Product Development) who is the beneficiary of the goods and/or services supplied and will determine whether to work with that supplier in future.
Risk, which comes into sharp focus in our increasingly turbulent global economy, is likely to be dedicated by the company's Risk & Compliance or HSE departments.
In each case, Procurement is charged with delivering someone else’s KPIs.
So here you are having to navigate the competing demands of your Buyers, Finance, and various Risk & Compliance departments. A buyer comes along full of excitement because I’ve just convinced them that my product can solution their latest business headache. You’ve now got to evaluate their claims and satisfy both Risk’s and Finance’s reservations before you can give the green light. Next thing I know, I’m getting a phone call from the buyer saying, “Procurement is being difficult, we need to find another way”...
It’s no surprise that Procurement gets such a bad rep!
Fortunately the turbulence of the past 12 months has given Procurement a real opportunity to reposition itself as the “good guy”, with the spotlight so intensely focused on how you can help companies navigate their way through this mess. As a newcomer to this world, I've already observed 5 simple things you can do to showcase your value:
1. Tap into your treasure trove of supplier data to tell your organisation what they don’t know
Procurement sits on a vast portfolio of data governing every interaction with suppliers that can deliver real insights and value at the highest level of the organisation. If Finance need to find 10% margin improvement over the coming quarter, Procurement has all the knowledge to tell them how to achieve it. If your Chief Compliance Officer needs to weed out suppliers who are most at risk of breaching the Modern Slavery Act, Procurement already knows who they are. But we can go further than that. Unlike the ERP that can only see financial information or third party risk tools that only track risk data, Procurement can link datasets across spend, risk and quality to provide a holistic picture of the supplier at increasing levels of granularity. For example, the Singapore office achieves better performance spending less with smaller suppliers, compared to the London office who prefer to concentrate spend with one low risk globally-recognised brand but suffer a lower quality of output. These insights balancing spend, quality and risk are Board-level discussions that play into the overall strategy of the business.
2. Expose the unique value of your existing supplier base to your buyers
Your supplier base is your best marketplace: you know them, you trust them, you have a track record of performance, and more importantly they’re already onboarded into your organisation. Similarly, and as a consequence of the disruption we’ve all faced over the past 12 months, your existing suppliers are more eager than ever to prove their worth to you and build closer, collaborative relationships that can live long into the future.
Procurement is uniquely positioned as the conduit for this engagement. By facilitating your buyers to build relationships with your existing supplier base early in the buying process, you enable them to make more informed purchase decisions, balancing spend towards your existing base, and in the event a new supplier is the right decision, helping the buyer to validate why.
3. Don't treat all new suppliers the same
Let’s be honest, one of the biggest frustrations for any new supplier is being asked endless questions that have no bearing on the goods or services you are supplying. For example, a stationary supplier does not pose the same risk to your organisation as a supplier that processes customer data or manufactures a key component on your product.
So why should the stationary supplier endure the same level of scrutiny in the onboarding process? Tiered procurement processes and rules-based onboarding flows tailor the experience to the risk characteristics of the individual suppliers, reducing the time to onboard without compromising the integrity of your assessment. The more you can make each supplier feel unique, the better their experience and the stronger the relationship will be moving forwards.
4. Embrace your role as an early warning system for the rest of the organisation
One of my favourite poems reads “If you can keep your head when all about you are losing theirs and blaming it on you.” Procurement has intimate knowledge of the inner workings of the supply chain, and as a result has the power to act quickly and decisively when things go wrong.
In an increasingly uncertain and turbulent global environment, this ability to identify problems, take control of the situation and adapt early can make the difference between vital supplies being stuck at Manston airfield or successfully routed from elsewhere. Taking charge of these moments and providing regular alerts and updates to the business facilitates a dialogue in moments of crisis and cements your value as the trusted voice.
5. Embed your value within the rest of the organisation
Procurement may not have a Board seat in your organisation today, but that doesn’t mean their value should be ignored. That being said, it is down to Procurement to educate the organisation about the value they can deliver.
By thinking of each department you engage with as a customer of the process, it can help to clarify the benefit you offer them and validate why they should engage. For example, a buyer is never going to respect the procurement process if they don’t get any value from it. But if you can demonstrate how engaging with you delivers them a richer supplier portfolio to choose from, they’ll be the first to buy into the process.
Selling the value of Procurement into the organisation starts at the top, but it’s the day-to-day interactions of your procurement practitioners that turns the sales pitch into a reality.
There has never been a more exciting time to work in Procurement, which too often has been regarded as an obstacle to progress. The turbulence we've experienced over the past 12 months and continue to see today is a wake-up call, creating a unique opportunity to reframe Procurement's relationship with the organisation.
Procurement can finally be the 'good guy'!