One of the topics of the moment in procurement circles is the value of the function, but pinpointing what exactly constitutes the drivers of value in an age of change and volatility is still, even today, an uphill task.
There’s some vital insight to be gained, then, on how to influence shareholder value, a question that will be at the heart of the discussions at the upcoming Procurement Leaders Forum in Chicago.
We caught up with Forum chair Joseph Sandor, the Hoagland-Metzler endowed professor of practice in supply management at Michigan State University’s Eli Broad School of Business, ahead of the event to get a taste of what’s to come.
What do you think will be the key learning from the Forum in Chicago?
Joseph Sandor (JS) - Although key learnings will vary by participant, the common thread will revolve around strategic activities beyond traditional price take-downs that drive overall firm value. In this arena, the focus is on the right costs, the right supply base and the right things stressing TCO, innovation, continuity/sustainability, flexibility and superior relations/integration.
One of the main questions that attendees to the forum are going to be looking at is ‘in what ways can procurement influence shareholder value?’ – are there any key points here that you think apply across industries?
JS - Yes, in a word: innovation. How can we incentivise and increase supplier-driven innovations in both processes and new product development that enhances overall network value that customers want - that’s the question.
If the US economy is entering a period of sustained recovery, does that mean procurement will have to fight harder to gain recognition and influence? Do you think there will be casualties among those who focus too tightly on cost management?
JS - Our recognition should be independent of the overall economy. Strategic procurement adds value in any economy. I don’t think there will be casualties among those who focus on cost management, but am confident casualties will befall those whose focus is primarily on price management.
Are procurement and supply chain executives, in your view, getting better at talking to internal counterparts? Has that come from more sophisticated CPOs or is that greater appreciation from the business of what procurement is capable of?
JS - Yes, slightly and both. Although integration/communications have improved over the past two decades, we ought not congratulate ourselves too much. Like the saying: “when all is said and done, more is said than done.”
Are the lessons that procurement needs to learn going to come from inside the function? Where should procurement be looking in order to find the lessons that are going to enable that next step change in driving shareholder value?
JS - These “lessons” will come from both inside and outside. By outside, I don’t just mean other functions in the firm but suppliers and academia. We should be looking everywhere!
Joseph will be contributing to the panel discussion ‘Accelerating procurement’s performance to increase shareholder value’, and will be providing the opening review and closing remarks at the Forum.
The Chicago Forum will be held at the Union League Club in Chicago on 28 March 2012.