How long will the savings last? What else should I be doing? What is the future value contribution of procurement? These questions have long kept CPOs awake at night. Last week, we brought together the leaders of Melbourne’s procurement community to wrestle with these topics and plot a roadmap for the next wave of the function’s value contribution.
The session focused on two key outputs. First, value beyond pure savings; and second, how to write good case studies to record the impact of those projects.
Many delegates noted savings were ephemera; easily obtained in the first cycles of centralisation or strategic sourcing but difficult to maintain where buyers scrape away perhaps a little too hard at the barrel. Once categories are optimised, savings should, theoretically, be unobtainable. Indeed, one participating CPO, for instance, was not targeted to achieve any savings targets.
Savings has always been a difficult topic for procurement. The reliance on debatable data points that are rarely used outside the function is a shaky foundation for CPOs’ primary key performance indicator. Many recounted tales of intense grilling by CFOs and boards in reporting, which often led to unconstructive exchanges around expected value in future. One was told by the financial head: “If you report a saving now, it shows you have been paying too much in the past.”
Even when teams deliver savings the business can verify, the executive leadership team expects the team to produce additional offerings, with many CPOs being asked: ‘So, what’s next?’
The next stage of procurement’s journey was a complex variety of outputs. Participants spoke of their impact on risk management projects, sourcing innovation and, most pertinently, developing into a commercial adviser for the business.
This moves the function into a somewhat uncomfortable environment, where it can no longer rely on its single metric. Instead, it is now accountable to identify the right metric to use at any moment and in respect of any stakeholder.
When we tasked the group to identify the value targets, the CPOs from Melbourne produced a rich array of objectives, including:
These are a snippet of the day’s debating points and, indeed, on a small sample of procurement’s overall potential. But by shifting the thinking of buyers from an exclusive focus on savings, they unlock a wide range of levers and innovations they can bring the business.
The challenge for CPOs is to account for the success of these projects – not with data, but with stories.
Moving on from savings targets is difficult for a function accustomed to the security of spreadsheets. The mathematical certainties of quantitative data are difficult to replace with qualitative testimonies. Buyers are known for being hard-nosed cynics and the ‘fluffy’ accounts of internal case studies may not be an attractive alternative.
Nevertheless, CPOs in Melbourne found it critical to provide a brief account of effective projects. Many reported the C-level appetite for success stories and forging succinct yet impactful cases was seen as the main vehicle by which to achieve that. Three pieces of advice stuck in my mind from CPOs that have curated successful case studies:
The future for the function – and procurement professionals – is full of diverse and exciting opportunities. Contributing to wider outputs and communicating procurement’s impact will be an important step for buyers building a roadmap to the future of value beyond savings.
This article is a piece of independent writing by a member of Procurement Leaders’ content team.