Calling All CEOS – What Are Your Options To Make Procurement Better?

Posted 22/08/2017

In our previous blogs in this series, we’ve looked to understand if getting procurement right will support the business to grow in revenue, and in profit and we can see that with between 83-400% returns that there is a case for giving this some serious thought. (See “ Why Your Business Should Invest In Procurement ”). Indeed, I would put it that there would be few other areas of the business that still have so much untapped potential. So even the most sceptical CEO would be missing a trick not to explore procurement transformation.

So, what are the options? The business of procurement can be structured quite simply at 3 levels. The base level is about getting the purchasing bit right – that is the process of setting up a supplier, placing an order, accepting delivery of the goods or services, accepting and processing the invoice.  The second level is about Basic Procurement - the tactics of buying – the use of standard templates, eSourcing toolkits, RFx processes (Request For Information, Request for Quotation, Request for Proposal), contracts, contract management, access to basic data (spend reports, forecasting, compliance monitoring, performance monitoring) – all the stuff that basically keeps the business functioning and that Chartered Institute of Procurement and Supply offer courses on.  Finally, the third level is about the creation of differentiation: “strategic procurement” which is the business of shaping supply markets to fit your needs, short and long term to create some form of competitive advantage whether it be on cost, quality, reputation, innovation etc.  Each are vital components of a fully functioning procurement team, and all need focus.  Apple would not be where it is today if their procurement was just left at basic – they have an enormous focus on strategic procurement – and it’s their relationships with key vendors that keeps them ahead.  Back in the day Amstrad could boast a similar position.

The mistake most organisations make is that they focus on the purchasing to pay processes to a greater or lesser extent, mainly led by the Finance function, and leave the Procurement function to focus on Basic Procurement only. Strategic Procurement is therefore left to be done in pockets, often completed by various other senior stakeholders within the business whose primary raison d'être could be IT, or Marketing, or some other discipline. Therefore, at best, there are occasional flashes of short haul greatness, but with little long-haul consideration on different flight paths that could be taken…and at worst, inconsistency created across the supplier base with different intents displayed to different strategic vendors based on the internal stakeholder bias. And bluntly, the creation of value from supply markets is not simple, and anyone doing it would benefit hugely from having some kind of framework to work within to make sure all opportunities are explored.

Each level, has a multitude of considerations, and providers available to support – all of which is moving fast, and far too extensive for this blog. However, what is critical for any organisation is to work out precisely what its vision is for building procurement capability across the organisation, and where the function of procurement might sit, its responsibilities and its size and design.  If you would like to speak further to us about how to establish a Vision, strategy and roadmap of change, and how to establish the right operating model for your organisation, please get in touch with Allison Ford-Langstaff for an initial chat.

DOWNLOAD YOUR SELF-HELP GUIDE  Build Your Business Case To Transform Procurement Performance

Tagged by topic: Category Management , Category Management Survey , Procurement Transformation

  by Allison Ford-Langstaff

Previous post
The Business Of Transformation Or Change Management – Which Are You Known For?
Next time you claim on your CV that you have run transformation…
Next post
Why Your Business Needs You To Be Great At Category Management
The answer is compelling. Category Management is a critical lever to…
comments powered by Disqus