Smart Procurement

Procurement Value is in the Eye of the Beholder

Greg Anderson, VP, Ivalua

I recently attended the Consero Procurement & Strategic Sourcing Forum in Miami. The Forum is a gathering of Chief Procurement Officers and other senior procurement and strategic sourcing leaders, who come together for a few days of networking, learning, and sharing best practices.

You can learn a lot at these events, especially when the executives keep it real and tell authentic stories. This was especially true for a panel entitled “Beyond Cost-Cutting: Procurement Departments With A Value-Add Focus,” which included an unlikely grouping of executives from four disparate industries: Food & Beverage, Pharmaceuticals, Performance Materials, and Communications.

Here’s some key points I took away from this talented group, who openly shared their experiences in elevating the perception of their Procurement teams as value contributors for their companies:

Defining Value

  • Value = providing solutions that internal stakeholders care about. This is about making things better in the eye of the beholder, whether that means enlisting suppliers who deliver better quality, better costs, or a better experience for the end customer.
  • Value = speed to market. Finding the right suppliers who enable you to beat the competition to market without introducing additional risk.
  • Value = creating a competitive advantage. Bringing on suppliers who help you create product or service differentiation in the market.
  • Value = supporting business partners. Understanding what stakeholders are trying to achieve and delivering suppliers who are best suited to support those achievements.

Making the Cultural Shift

  • Becoming value-focused requires a move away from traditional performance metrics (e.g. cost savings, beating inflation) toward more outcomes-based measurements (e.g. number of successful product launches, time to market, customer satisfaction)
  • Education is not to be overlooked. The broader organization and stakeholders need to understand what Procurement can do for them. Sharing wins is important here, but it is much more powerful when the business stakeholders are getting the credit and telling the stories.
  • Level up your team. Bring in outside talent for a fresh perspective and new ideas. Find people with the soft skills required to effectively engage stakeholders and earn their respect as trusted advisors and business partners.
  • Intelligently allocating resources. Put your best people’s time into the most critical, big strategic spend opportunities. Make the day-to-day transactional buying activities fast and easy with empowering technology.
  • Seek stakeholder feedback on performance. Some Procurement teams think everything is working perfectly. They are out of touch with the rest of the business and become complacent. Complacency is bad and what matters is how the business partners perceive the value of the Procurement team. Here a net promotor survey can provide a quick indication of performance.

Indicators of Success

  • You know you’re adding value when the business comes to you for support and solutions
  • You know you’re adding value when you’ve got objective, mutually-acknowledged metrics for measuring the business value achieved with Procurement’s support.

 

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