How can the concept of procurement come to be understood as much more than merely a vehicle for cutting costs? Why are many organizations still not realizing procurement as a strategic business partner?
In a recent guest post on ProcurementLeaders.com, Graham Copeland, Head of Sales & Marketing at Xchanging Procurement Services, tackles the issue of a ‘procurement rebranding,’ noting that the organizations that consider procurement as a strategic partner today “are sadly still in the minority.” He writes:
Other business functions, such as HR, Marketing, Finance, and Operations, are measured against hard KPIs like attrition or market share but they’re also recognized for providing value beyond that single dimension. They are recognized for their strategic contribution to the business. Procurement on the other hand, is more often measured against one sole metric—savings.
At Vroozi, we preach the importance of procurement and the impact that can be felt throughout an organization. We believe that creating a blueprint for success in procurement can create a corporate culture more conducive to a complete strategic alignment and spend-entrepreneurial conduct.
Those involved in successful procurement departments understand that they provide a multitude of services across the business landscape, often more than can be measured purely in the dollars and cents of the cost savings they provide.
Those involved in successful companies should understand that one of the keys to sustaining their market excellence is recognizing the organizational impact that procurement can have. For companies still slow to fully embrace their procurement brethren, here are some of the ways that the procurement can rebrand itself as a strategic partner in an organizational structure:
Promote a Cost-Conscious Culture
When procurement is implemented properly from the ground-up, the result can be a spend-entrepreneurial mindset that is felt throughout an organization.
“A good procurement department can change the way your business thinks about money,” says Copeland. “With training programs for all employees and incentives for good behavior, procurement can persuade stakeholders to think about spending differently – to think about company money as if it were their very own.”
Procurement maturity in an organization can be achieved once the company acknowledges procurement as a business competence, rather than simply a functional one.
Successful supply chains are built on years of strong relationships. Every company has preferred suppliers, which are largely determined based on the trust built up through prior dealings. With a strong procurement department in place, a business can revise the way they select suppliers from the beginning.
As Copeland suggests, “A strict competitive process for supplier selection ensures value for money on every transaction and yields insight around the true worth of the relationship.”
A good procurement department can instill a cross-corporate culture that drives innovation throughout the organization and even beyond the office confines. While most companies generally project their own needs onto their suppliers, procurement-mature organizations understand the vast wealth of knowledge that suppliers carry in regards to insight on industry activity.
Copeland maintains that regular dialogue between key suppliers and top management is a great way to integrate suppliers into the business. This type of approach, he contends, “can lead to better product development, better campaign and sale activity, more operational efficiencies and so on.”
Understanding that your suppliers are as much a source of innovation as many of those in your own organization is an incredibly procurement-competent approach to your business. When a procurement department is allowed to drive results in both new and established partnerships, the impact will be felt all the way through to a company’s bottom line. That is understanding procurement as a strategic business partner.