by Alex Saric
In part 1 of this blog I looked at how procurement can actually create new revenue opportunities. Here I’ll take a look at two other ways that procurement can help support growth. These are less revolutionary than the first but not used to their potential at most organizations.
Supplier-led innovation can help increase margins, accelerate time to market and differentiate products/services to capture market share. Even in indirect purchasing, giving suppliers more flexibility in how they meet requirements can increase savings and sustainability. As organizations become increasingly dependent on suppliers, the potential value continues to increase.
A great example is Meritor, who brought a unique approach to supplier collaboration and new product introductions to life, delivering more products at higher profit to support a board level initiative and multiply their stock price. Many other organizations have leveraged this strategy, but almost all can do so better to drive greater value. The following approach can help:
Technically, this 3rd strategy does not itself drive revenue growth. It is, however, essential to preventing unexpected disruptions to sales. Analysis by McKinsey found that companies can now expect losses equal to almost 45 percent of one year’s profits over the course of a decade due to supply chain disruptions.
Agility is needed not just to avoid disruptions. Today’s active regulatory and legislative environment means companies will have to remain agile in their supply chain strategies to ensure compliance, or to support strategic objectives. For example, supply chains may have to be adjusted to support new company sustainability or other CSR policies. These can impact the brand and hence revenue. No wonder no other objective increased in importance more according to Forrester Consulting’s study on restoring growth, with 65% saying it increased.
Success requires the following:
Organizations’ spend and suppliers are often an untapped resource to drive growth. Procurement leaders must show the way, for the sake of the business and to show that procurement is as relevant when growth is in focus as when cost is.
Alex has spent over 15 years of his career evangelizing Spend Management, shaping its evolution and working closely with hundreds of customers to support their Digital Transformation journeys. As CMO at Ivalua, Alex leads overall marketing strategy and thought leadership programs. Alex also spent 12 years at Ariba, first building and running the spend analytics business as General Manager. He then built and led Ariba’s international marketing team until successful acquisition by SAP, transitioning to lead business network marketing globally. Earlier, Alex was a founding member of Zeborg (acquired by Emptoris)where he developed vertical Procurement applications. He began his career in the U.S. Cavalry, leading tank and scout platoons through 2 combat deployments. Alex holds a B.S. in Economics from the U.S. Military Academy at West Point and an international M.B.A. from INSEAD.
You can connect with Alex on Linkedin