There’s a lot more to sustainable success in procurement than simply finding the best value. Furthermore, procuring value means much more than finding solutions for cheaper. As Gerard Chick, the Chief Knowledge Officer at Optimum Procurement Group, writes on SupplyManagement.com, “There’s a lot more to being a category manager than being a buyer—they need to take account of the consequences of their actions and recommendations.”
It’s easy to look at a procurement team and suggest that they’re experiencing success in their operations because they’ve minimized their purchasing costs. However, we’ve seen time and again that many companies are unable to maintain their levels of savings from year-to-year due to an incompetence of what it means to be procurement mature. Reaching for ways to quickly reduce costs without properly assessing the long-term feasibility of each action is not just irresponsible for your company, it’s potentially dangerous. Says Chick:
Procurement has a role in delivering value and smart cost reduction is about buying the products and services you need at a competitive price without exposing your business to risk or failure. If you are value driven, it goes beyond getting what is just cheaper, because cheaper in some industries could mean disaster.
Chick uses the real-world example of a company he knows of having procured cheap steel from China. The company may have saved a few bucks on the purchase, but introduced an entirely new line of expenses when they were forced to deal with the fallout from a bursting pressure vessel.
Don’t make the same mistake as the company Chick describes. When designing a procurement process, accentuate value in both purchasing and people. To find true success in procurement leadership, consider your partners inside and outside of your organization by following these keys to intelligent procurement management:
Build a Strong Foundation
A proper structure is built from the ground up. Create a blueprint for procurement success by establishing a detailed approach and supporting the enablers of change. Most of all, employ a good team. As Chick suggests, “Tools and techniques are great but they’re only as good as the team using them.” Find creative people, develop them, challenge them, and enable them to challenge themselves.
Internally and externally, a procurement leader must assess what needs to change to best suit the managerial needs of the organization. Whether in contact with your own staff or your supply chain partners, it’s important to remain positive and to appear ‘business-as-usual’ in the face of adversity. Understand that there is often an adjustment period and a learning curve for implementing both internal and external procedural adaptations.
In order to develop a program for supply chain management optimization, it’s important to find an aligned view of what works in collaboration with your partners. Understand that developing a narrow-minded procurement strategy that focuses solely on your own cost savings may lead to negative relationships with your partners.
From your stakeholders to your partners to your staff, everyone (less your competition) wants to see your procurement team successfully—and competently—reduce expenses. As a leader, exude confidence in your procurement approach and those around you will embrace the same assurance. “Ultimately,” says Chick, “it is successful delivery that really matters.”