In my second article in this series, Aligning Procurement: People, Technology and Processes to Deliver Value, I left off with a comment about the skills that the new generation of procurement professionals needs to acquire: creative, scientific, and organizational.
The Importance of Communication
An important aspect of the organizational part is communication with internal stakeholders. We need to learn how to make our pitch based on an understanding of, and empathy towards, each audience. And if we want a seat at the top table in the organization, we must learn to talk the language of the top table.
So, in this concluding article in the series, I would like to focus on some points that were raised in our discussion on the subject.
Among ourselves, as procurement professionals, we rightly take an interest – more than that in fact, we take pride – in the savings we make. It’s been our KPI par excellence. But in the experience of many, that’s not what board-level executives want to hear, and there is a danger of overpromising and raising expectations unduly. At best, the returns will diminish over time in most categories.
A participant from a leading high street retailer added that the board is also not really interested in the procurement process, either. He thought that too often procurement conversations are process-led: “We’ve run a bidding event, we had this many vendors, it was over this many weeks and this is what the price was and where we got it.”
we need to think of ourselves as commercial consultants to the organization and focus on the business problems that we are trying to solve, cross-functionally
Business leaders take it for granted that we, as procurement practitioners, know what we are doing and run our departments efficiently – that’s what they pay us for. We need to communicate at a higher level, showing that we have understood and aligned with the business strategy, and we have put in place the right framework and governance to ensure that our teams always move in the right direction.
A speaker from government echoed these thoughts: you need to demonstrate how your sourcing and procurement strategy is mitigating risks and addressing the corporate, ethical, social and economic issues that are high on the leadership’s agenda, such as sustainability.
The general consensus was that we need to think of ourselves as commercial consultants to the organization and focus on the business problems that we are trying to solve, cross-functionally.
A good example is what Bob Murphy, Chief Procurement Officer at IBM, did. He put a dozen or so of his best procurement people directly into IBM’s R&D programmes. And that had a massive impact on innovation because the procurement experts knew the suppliers, how to work with them, and how to get the best out of them. It was a really good move, and organizations have now adopted similar processes in other sectors such as pharmaceuticals.
Technology is Your Greatest Ally
The big question is how you buy the time to move procurement into a consultancy role and develop relationship-building skills and activity. And there is no doubt, that technology is your greatest ally here.
You can’t automate everything, but you can automate many of the routine tasks that stop procurement from focusing on delivering success and value. The new generation of procurement professionals expect this. They were virtually born with mobile phones in their hands so they will only want to work in organizations and functions where most of the drudgery has been abolished by adopting advanced technology.
The flip side of that coin is that they want to join organizations that are led by purpose. To make money, yes, but to make money in a way that serves humanity in a positive way.
There is increasing evidence that such organizations are the ones that perform best. We must use this evidence when we communicate on topics such as sustainability or diversity.
You may never convince everyone that it is the right thing to do – especially if those people are judged on criteria such as stock market valuation or balance sheet. However, they will listen if you can explain why promoting sustainability in sourcing, or sourcing from a more diverse set of suppliers, is the smart thing to do to, for example because this is what drives innovation and, frankly, because this is what our customers are asking for.
Taking Pride in Your Supply Choices
There is also a lot to be said for taking pride when our internal stakeholders and external customers can identify and place a value on the supply choices we make as a business.
Successful brands are those that have great stories to tell, and our suppliers are part of that story. That is why, for example, traceability and transparency have become such hot topics, especially in food and clothing retail.
So here’s another area where procurement can add value in ways that it maybe hasn’t done in the past: marketing. Supermarkets like Sainsburys, Marks & Spencer and Tesco have done a great job not just announcing their sourcing codes of conduct but demonstrating, with a real human touch through storytelling, what it means in terms of encouraging sustainable agriculture, supporting smallholders, challenging on land rights issues, reducing the use of pesticides and so on.
We need to extend these best practices to other sectors, including business-to-business sectors like IT and industrial tooling, because ultimately, we all contribute to customer success. Whatever business we are in, let’s not underestimate that kind of emotional value around sustainability and other ethical and social issues that could be brought to life through close involvement by procurement.
This is where we need to get even better with negotiating as partners, rather than simply as buyers and suppliers.
#ThursdayThought – Take a different approach to negotiation this year. @MollyFletcher recommends thinking about the other party before your own needs and wants. #procurement #negotiation pic.twitter.com/YKGVz9LfCY
— JAGGAER (@JaggaerPro) January 2, 2020
We need to communicate to our business partners what our customers value, and what they won’t tolerate, then work together to come up with solutions where everybody wins. And we should be proactive about it.
The apparel business has made progress in terms of ethical and sustainable sourcing at scale, although it took a couple of high-profile scandals to move things forward. Now, the entire business model has been revolutionized. An executive was quoted in McKinsey’s 2019 Apparel CPO Survey as saying, “There are diminishing returns from the old model of moving continually from one low-cost sourcing country to the next.”
Finally, none of this is to diminish the great unseen work that procurement does in terms of getting things done day in, day out.
As one of our speakers said, few people look under the bonnet of a flashy sports car, and if they do, there is nothing much to see these days – the smart engineering is all enclosed in casing clean enough to eat your dinner off! But likewise in procurement if we can get the engine running smoothly, with the help of automation, we can put more emphasis on our role in driving the business forward.
The bottom line: procurement’s centre of gravity is shifting from making savings to delivering value.
