It’s probably a sign of progress in the way the procurement community sees itself that a panel discussion about value creation is able to go beyond talking about the question of ‘how important is it?’ to start talking about ‘how can we make sure it’s as effective as possible?’.
The chandelier-decked hall in the magnificent Hofburg was ringing with the thoughts and opinions of CPOs who wanted to know how they could impact the topline – and what kind of manoeuvres their contemporaries were prepared to make to do so.
Roger Davies, group head of procurement with UK retailer Marks & Spencers could not have been clearer – the kind of sustainable activities he and his group could bring about in the business and in the supply chain was a vital way to add to the topline. It’s been part of procurement’s drive for a higher profile and it’s been part of the culture they’re looking to embed in everything they do.
But what about where it incurred cost? It’s probably an old question now, but the audience were unafraid to test the commitment of Davies and the other panellists. Their answers, to varying degrees, were that in cases where they could prove that the cost incurred in buying paid back in selling they were comfortable in selling the concept. However, in a company like Davies, where sustainability was core to the brand that’s an easier distinction to make than for some of those who would like to be able to source sustainably, but found it harder to project medium and longer term benefits.
Elsewhere value creation was even less clear cut. Nicolas Passaquin, vice president of sourcing for Thomson Reuters was quite vocal about the potential conflict that can arise when procurement gets directly involved in helping out sales. Sure, when you say that you’ll buy from a particular group on the understanding that they’ll sell to you at a discount (think a tyre company speaking to a logistics group) there are obvious advantages.
But this idea of ‘reciprocity’ also has its problems. Former head of procurement at DHL Deutsche Poste and forum chair Hugo Eckseler was unequivocal that during his tenure, he would not get into reciprocity, not least because of the potential compromises on quality or supplier management that might ultimately arise.
For Tim Bass, CPO of BP Angola, who raised the point from the floor, reciprocity was in fact key for his efforts. He saw it as ‘mutual advantage’ and it had helped open up the Angolan market.
Plenty more besides came out, but the overriding notion was that value creation isn’t just something you can make happen by coming up with the idea and isn’t an end-in-itself - it requires focus on alignment with overall business objective, potentially more than it might occasionally be given. That way, when the difficult questions start heading procurement’s way, they know the right answers.
Steve Hall is deputy editor for Procurement Leaders Magazine.