Procurement Rising – The Time is NowSmart Procurement
Procurement’s stature has grown during the COVID-19 crisis as costs, cash flow and supply continuity quickly became top boardroom priorities and homepage news. Across the world, procurement leaders have risen to the challenge. Examples abound.
Honeywell successfully shifted production to N95 masks, helping keep healthcare workers safe. The city of New York adjusting normally cumbersome processes to secure new sources of supply for unprecedented numbers of ventilators.
Danske Bank accelerated supplier payments to help small businesses stay liquid. L’Oreal shifted production from perfume to sanitizer. People should be thankful, and procurement practitioners proud.
That success came from many long nights and a lot of sweat. The temptation is no doubt to rest once the situation calms down. But let’s not do so too long, or we’ll miss perhaps the greatest opportunity to permanently elevate procurement’s stature. As organizations look beyond the panic and shocks created by Covid-19, procurement leaders must show that they can contribute to restoring growth and supporting a broader list of objectives. Those that do so will maintain their slot on the boardroom agenda permanently.
But how? The reality is that too few procurement teams have experience here. A core goal of Ivalua’s in 2021 is to help more leaders do so. At Ivalua NOW 2021, which will again be virtual to ensure safety and allow greater participation, we’ve selected “Procurement Rising” as our theme for this reason.
Natacha Trehan, who leads the Purchasing Master’s degree at the University of Grenoble Alpes, will deliver a keynote providing further insights based on her experience working with and advising dozens of procurement organizations over the past decade.
The rest of the agenda will focus on showcasing procurement leaders that have succeeded in one or more ways, and how current and new technological innovations can help.
Let’s take a look at the high level lessons we’ll dive deeper into at the event.
Sharpen Your Sales Skills
As is usually the case, it ultimately starts and ends with people. A key challenge in most organizations is that there is little awareness among executives of just how and where procurement can help (besides cutting costs and ensuring supply that is). Procurement generally does a poor job of promoting its full value or successes, exacerbating the problem.
That needs to change and it must start at the top. CPOs will have to become better sales people, educating their leadership and convincing them to provide the required resources to execute. Now that most have their CEO’s ear, there couldn’t be a better time to start.
Effectively engaging executive leadership is critical, but insufficient. To both confirm the right opportunities and then execute against them, procurement must expand that engagement and its influence to other parts of the business. When it comes to restoring growth, there are many possible strategies, which vary by industry and organization (and the creativity of your talent). Only effective collaboration will reveal the possibilities. Be the one that reaches out and makes it happen.
Sprint’s strategic sourcing transformation, presents a great example, in multiple ways. First, their approach digitized not just the sourcing process itself, but also requirements gathering from the business, providing transparency into the pipeline and prioritization across the company. But then engagement with the handheld division identified a revenue opportunity.
They configured their eSourcing technology to run high volume forward auctions to optimize the price received on used handsets. The net impact was $1B in annual revenue AND $2B in annual savings. Such creativity shows the potential to generate revenue opportunities by engaging the business.
Digitize the Right Way
Sprint’s example also highlights another point. It’s people that drive real value, but they need the right enabling technology to succeed. Digitization is key to procurement transformation. It frees capacity to engage the business on more strategic initiatives.
It can improve decision-making by providing better insights when and where you need them. And it can connect internal stakeholders and suppliers to scale collaboration (think of the many stakeholders needed to launch a new product or drive ongoing improvements in sustainability).
But first it must be adopted for any benefits to materialize. There has fortunately been significant acknowledgement and focus here in recent years. Technology has become easier to use and leaders place more focus on change management. But some companies still struggle. David Loseby, Roll’s Royce’s CPO, will deliver a keynote at Ivalua NOW 2021 to help, explaining how applying behavioural science can help deliver effective adoption of digital platforms.
But you must also think beyond deployment and adoption if you expect to transform procurement further, into a source of strategic value. Digitization has to be done smartly, with a carefully thought out roadmap from the start.
Too often, today’s focus on automation and standardization ultimately stifles innovation and becomes a roadblock to more advanced stages of transformation. The shift to cloud-based solutions has brought many benefits, but often more rigidity.
Technology needs to drive standardization where appropriate while still having the flexibility to bring unique ideas to life. If Sprint’s sourcing technology was rigidly designed for standard sourcing best practices, they could never have configured it to run high volume forward auctions to sell as well as buy.
At Ivalua NOW 2020, commercial real estate leader JLL’s president explained how they were building a marketplace to offer customers access to pre-negotiated pricing, using their spend to differentiate their services.
Or look at Meritor, who brought a unique approach to supplier collaboration and new product introductions to life, delivering more products at higher profit and multiplying to support a board level initiative and multiply their stock price. Further examples from diverse industries that procurement can support growth, IF they have technology that standardizes where appropriate but still supports unique processes.
Procurement leaders have the potential to not just transform their businesses, but the world by how they spend and manage suppliers. 2021 should be an ideal time to demonstrate that as we hopefully transition to a focus on growth with Covid-19 receding.
New revenue opportunities, more sustainable and agile supply chains, accelerated innovation. It’s all possible and innovators are already delivering. Let’s make 2021 another year to be proud of, with procurement keeping its slot on the boardroom agenda.
To learn more on how the world’s most innovative leaders are helping restore growth, join us at Ivalua NOW 2021 – Procurement Rising.