I lose count of the number of times I’ve written or spoken about how procurement is lucky to occupy the position it does in the value chain.
In theory, CPOs and their teams are plugged into every area of the business while, at the same time, they have unparalleled access to thousands of suppliers. In the more advanced functions, they are also linked into the downstream supply chain, meaning procurement becomes a direct link between consumers and the supply base.
It’s a powerful position to be in. But in order for procurement to really take advantage of this position, one thing above all else has to be in place: trust.
First and foremost, procurement must earn the trust of internal stakeholders (something that comes with credibility and results). But, more importantly, procurement must earn the trust of key suppliers if it is to bring new capability to market before the competition.
In a recent article, we spoke to the executive vice president for strategy at ARM Holdings, Ian Drew. For those who don’t know, ARM is probably the UK’s most successful UK tech story of recent times. Since its inception in 1990, it has shipped more than 60 billion chips to market, and today more than 95% of smart phones utilise its technology. Perhaps even more staggering, more than 35% of electronic devices do too.
While Drew was speaking to us about issues beyond the realms of just procurement, his words are illuminating. “We probably know more about the industry than almost anybody else… One of the things we learn and teach inside ARM is; [we] know an awful lot but you can’t go tell anybody [what other companies are doing].
“You have to build up a company culture of trust. People probably won’t tell you things that they think are going to happen unless they trust you to use [that information] in the right way.”
ARM sits in a similar position within the value chain as procurement does in an organisation, as it is, essentially, a contract designer of chipsets to the tech industry. It needs to understand the strategic direction of its clients (competitively sensitive information, the likes of which can make or break a company’s fortunes) and it needs to link this information with capability in its own design teams and supply base.
Like procurement, ARM occupies a key position in the value chain, linking the strategic vision of clients with specific capability and knowledge. Trust, in such a situation, is pivotal.
So, speaking to the CEO of another electronics company (itself, a major supplier to the tech industry) provided an intriguing insight into how suppliers see procurement playing this role. The conversation focused on how open discussions (based on trusted relationships) with procurement would lead his own teams to the right people within his client organisations.
Rather than gatekeepers and guardians of control, procurement becomes a conduit for capability and need.
And there lies one potential future for procurement – a future where procurement sits at the centre of key strategic discussions, where it understands the needs of stakeholders and customers and where it matches those needs with the right supplier capabilities.
This article is a piece of independent writing by a member of Procurement Leaders’ content team.