Aligning Procurement: People, Technology and Processes to Deliver Value
- Blog
- Cross-Industry
- Supplier Management
In the previous article we concluded that to have meaningful supplier visibility, you need to know what you are looking for, and what value your organization places upon it.
In the light of disruptions to supply chains and new challenges such as sustainability and CSR, this places new demands on procurement, many of which were surfaced at a recent cross-industry roundtable hosted by JAGGAER UK.
A participant from an owner of leading CPG brands illustrated the move away from measuring procurement purely based on savings: “Don’t just get me something cheaper, get me something I didn’t have before, that brings some benefit”.
He described how over the past three years they had tried really hard to save money on packaging, but at the same time, they wanted to ensure they sourced recycled and recyclable plastic for inclusion in products at a reasonable price. He reported that in the end, nobody in the organization said, “Great, you saved five per cent”. Instead, everyone said that it was fantastic that they found suppliers who could actually supply the materials at the right capacity, beating the competition, and delivering on customer expectations.
I think this goes to the heart of the way procurement is changing. We don’t just buy. By understanding the market and working with suppliers, we engineer value. Perhaps it is time to change the name of the function from “the procurement department” to something that communicates the benefits we deliver.
Value Creation Through Compliance
A second added value, which is sometimes talked about too little in the same procurement professional’s opinion is procurement’s role in ensuring compliance. And let’s face it, who wants to talk about compliance unless you are a compliance officer or working in the legal department or whatever.
Most commercial teams say, ‘Ugh, come on, just make sure it’s compliant, and basta’. It’s not a sexy topic of conversation. But it’s something the folks in procurement take care of for the business. They make sure the business follows a certain process through the internal and external negotiation and this addresses legal and reputational risks, so that is a benefit, and it has a value, even if it is not measured.
Value Creation Through Agility
‘agile’ is a word that gets misused all the time
A third added value is even more intangible: agility. We all need to be agile, whatever processes we might have in procurement. Agile has become a buzzword, it’s true. But it is worth exploring its meaning.
The only way to get this agility between external partners and your internal team is to build relationships, and that does not happen overnight. If you have a fantastic relationship, if you trust each other, if you’re transparent with each other, that makes it possible to say, “Team, how are we going to tackle this problem?” whereas if you have an old-school them and us, distant relationship, always negotiating about price in the quest for savings, you are not going to get this much sought-after agility.
Another contributor, this time from a major UK high street retailer, drove home the point by stating that “agile” is a word that gets misused all the time. People assume that being agile is synonymous with doing things fast, but in reality, you can do most things fast once.
Agility is rather the ability to continue evolving, doing things differently, and “that’s a completely different muscle set that needs to be developed”. He added that some of the things we did during the Covid-19 pandemic, and to get through the initial impact of Brexit were fast, but that’s not being agile.
Agility is something that develops over time and has more to do with resilience. I’d put it like this: it’s the difference between putting out individual fires and building a competent and well-equipped fire service, ready and able to jump into action at any time. It’s important to separate these concepts.
New Skills Needed
True agility also requires bringing a different skillset into procurement, and the appropriate technology.
A third contributor, from a major grain marketing organization, reported how his team had dealt with scenarios over the previous 18 months throughout Covid and achieved things that people thought were impossible. But this in turn created unrealistic expectations that this would be the new norm. The new challenge was to find ways to be able to continue to deliver at similar levels. If we can do it once then theoretically, we can do it again. In reality, however, if everyone’s exhausted after delivering at speed, human beings, as mere mortals, cannot reproduce the same results sustainably.
This, I believe, is where process and technology must come in. With processes you build on the amazing things you did and the knowledge you acquired when doing something well, perhaps for the first time, and turn that into something repeatable.
With technology, you then give yourself the set of muscles needed to do the same thing time and time again. What is sometimes referred to as the heavy lifting. The clever part is designing automation where it makes sense to automate, where you can move the transactional part of procurement, the day-to-day execution, to become a task that more or less takes care of itself. You can then focus the procurement team on the creative tasks, which are fundamentally about adding value.
Different Skillsets for Today’s Procurement Professionals
And this in turn means changing how procurement is done, which calls for different skillsets.
One is the creative part – doing something new. Another equally important skillset is the scientific part – the ability to read, interpret and analyse data. Automation produces data in abundance, but it can only be used to identify new ways to deliver value if you have an analytical toolset and people trained in data science.
The final piece of the puzzle, which is all too often overlooked, is the organizational or managerial part. That’s to say, the ability to align people, processes and technology to the organization’s business objectives and communicate this effectively at board level. Over the years procurement has learned to speak the language of the Chief Financial Officer, who is understandably interested in how much you are going to save, because he or she can see a clear bottom-line benefit.
But convincing the CEO and the rest of the board that you can deliver value – by mitigating risk, ensuring sustainability, or building supplier relationships to ensure continuous innovation and so on – that’s a different matter entirely.
Procurement – or whatever we choose to call it in future – will be supported by these three pillars: the creative, the scientific, and the organizational.
What a great place to work!