In this series on effective procurement, we discuss how procurement functions can successfully become a value-adding business partner to the organisation – they help the organisation execute and capture value faster, drive innovation and deliver sustainable change.
In our previous blogs, we explored the first five steps to drive procurement effectiveness:1. Developing the right procurement strategy, including identifying the right input performance measures and value-based output measures
In this blog, we explore the final step – demonstrating visible leadership to both internal and external stakeholders. This cements the previous five steps and is particularly important in times of uncertainty and business disruption.
The Procurement team must demonstrate leadership across the organisation’s entire supply chain to lock in the previous five steps. With local and global supply chains disrupted, Procurement’s value-adding role has never been more crucial. Procurement teams play an important role as commercial ambassadors, so need to proactively take steps to maintain their organisation’s supply chain.
What to do now?
In the immediate term, Procurement should seek to understand both:
This requires engaging with both suppliers and internal customers like finance, strategy, R&D, marketing and operations. Procurement should take the lead to rapidly identify supply risks and prioritise them. This will enable the organisation to then take steps to secure supply of critical items, adjust plans to accommodate the constantly evolving nature of the crisis and communicate to all internal customers.
As the effects of the crisis develops (and eventually dissipates), we will move to a new normal where Procurement should continue collaboratively engaging with both internal and external stakeholders to build a more resilient supply chain. As this transition occurs, the procurement leadership team should aim to become champions of value, agility and commercial pragmatism, rather than reverting to acting as auditors and policy enforcers.
This is a unique opportunity to find better ways to do things and enable the organisation to continuously capture value. For example, if Procurement can gain full visibility across the organisation and deep into the supply chain (leveraging tools like Supply Chain Control Towers and Collaborative Sourcing) it will be better able to anticipate risks, emerging trends, sustainability issues and new value drivers beyond cost reduction or pricing arbitrage opportunities. With enough visibility, proactivity and credibility – procurement can become the ‘nerve-centre’ of the internal and external supply chain – driving innovation and value to consistently create competitive advantage for the business.
Done well, Procurement will cease to be just an overhead function with cost-reduction objectives, but instead take a value-centric and fact-based seat at the leadership table – attracting the best talent, perhaps even serving as a commercial training ground for other parts of the organisation.
With rapidly shifting trends and uncertain global supply chains, Procurement has an increasingly central role to play in all organisations. It can no longer remain in its traditional role of transactional purchasing and compliance enforcement, but must shift its focus towards anticipating change, mitigating risks and delivering value across the internal and external value chain. To achieve this transformation, Procurement must change the systems, processes, skills, staff, habits and behaviours that shape how their organisation performs.
By adapting existing approaches and building capability to address the six steps outlined, Procurement organisations can become ambassadors for value-based decision making and play a central role in driving sustainable change.
Read about how we have helped clients improve the effectiveness of their Procurement function here.
Click through to read other blogs in this series: