This extract is a preview taken from the Making Procurement Simple series. To read the full article and find out more about making procurement simple, click here.
Having invested a lot of time, effort and resources on understanding sourcing, tendering and negotiation, it turns out these are the easier parts of procurement. A more difficult aspect for the function – engagement with stakeholders inside and outside the business – often fails to get the attention it deserves. The problem then is that procurement risks missing an opportunity to bring more spend within scope, improve compliance, get greater visibility over spend and, above all, ensure the business gets exactly what it needs.
John Walker, global director for investment, supply chain and manufacturing at global snacks group Mondelēz International, says procurement can find it difficult to engage stakeholders because they have different careers outside the main business functions. “Procurement people can tend to speak a different language,” he says.
One consequence is that stakeholders might not know what procurement can offer, aside from cost savings. “Very few managing directors have done procurement and so they don’t fully comprehend the value it can bring. Part of the job is to listen to their concerns and sell the advantages we can offer,” says Walker. “This might be improved quality, compressed delivery times or better production cycles: it is not always cost savings.”
Recent research by Oxford Economics for Ariba and SAP shows that more than two-thirds of senior procurement executives and employees say procurement is ‘becoming more collaborative with other parts of the business’.
But while many businesses recognise the importance of engaging stakeholders with the procurement process, they don’t all have a strategy dedicated to this ambition. But a clear strategy is needed so procurement knows how to start (or improve) the management of multiple, complex and different relationships.
The reasons procurement organisations struggle to get buy-in from business units are two-fold, says Nigel Scorey, CEO of consultancy Procure4. The function will often be associated with a small number of categories at the heart of the business. In food manufacturing, for example, this might be raw ingredients. While procurement might believe the same skills and methods can be applied to new areas of spending, such as IT, in truth there are important, sometimes subtle, differences.
“When buyers are invited to look at new areas, unfortunately they think that because they are experts in one area of spend, that can be applied to media buying, office suppliers or construction,” says Scorey. “But the stakeholder has been buying those categories and taking responsibility for contracts for maybe ten years. It is human nature for them to say: ‘Who are you? You buy raw ingredients, you don’t understand media and advertising. We’ve done that for years.’ Procurement is often trying to apply functional expertise to areas where it has no experience and immediately there is tension.”
On the flip side of the problem of procurement not knowing enough about other areas of spend may lie another issue – stakeholders that don’t currently engage with procurement may only know the function for its core area of expertise. They will not recognise procurement as having expertise in their area and so will be dubious about the value procurement can bring, even though it may lack specialist sector knowledge at the outset.
This is an extract. You can read the rest of the article here.
The Making Procurement Simple series is produced in partnership with Ariba, an SAP company.
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