Procurement Leaders asked me to share my thoughts on how we can reinvent procurement as a customer-centric organisation. I have taken the liberty of changing the title. I believe the word ‘customer' is misplaced if used to describe an internal business partner or colleague. In my book, a customer is an external business partner.
For years, procurement functions have been fighting to get a seat at the table. Now we are finally there, we need a firm mindset as to how we view ourselves and our internal relations in the companies for which we work. Let us not get ahead of ourselves, though, clearly we are a support function and our role is to help the business be successful. That, however, does not mean that we should treat our colleagues in the business as customers, but rather as, yes, colleagues.
With credible and competent people in our organisation, we can act in our own right with a clear value proposition. We work with the business, in the business, but not for the business! There is no doubt that it is a great balancing act to ensure proximity to all the relevant business activities and, at the same time, to keep a certain arm's length – which enables us to play the role of commercial challenger.
Our role is, however, not only to deliver commercial value and drive the cost agenda but, equally importantly, it is to connect with our technical and operational colleagues in the business and with our supplier community for additional value. It is in this ‘integrator' or ‘connector' role we can truly move the needle. Think about supplier-enabled innovation and the digitisation of procurement with Big Data and the Internet of Things, for example, where we can bring suppliers and colleagues together to achieve innovation and increased value.
This reinvention is not happening and will not happen through mandates. It is through the competencies of our staff and the proximity with the business that we will achieve the trust to play the integrator role.
How do we then get the proximity to that business while maintaining independence? We cannot simply rely on satisfaction surveys that provide us with that can provide us with a blissful, temporary feeling of contentment. We must focus on more value-generating initiatives and our team has identified six key areas:
1. Alignment with business leadership teams
Our heads of procurement are close to the business unit management teams. We need to have a seat at the table where decisions are made to push the commercial mindset and the cost-leadership agenda.
2. Functional reporting lines
We live and breathe a ‘matrix mindset' in our operating model. Our people report into the procurement organisation, but with dotted lines to the COO organisation, building trust and alignment throughout the organisation.
3. Alignment with business strategies
We have a complementary, rather than an independent, strategy. Short-term changes in the business environment need to be balanced with our long-term desire to develop our profession. Our strategy process always starts with an alignment review of the business strategies â€¨and ends with a review with the CEO.
4. Co-location with business
We operate with a ‘2-2-1 mindset'. Ideally, our people spend two days with suppliers, two days with our business colleagues and one day in our procurement office. It is key to ensure a strong sense of belonging to the procurement community for personal development and best practices.
5. Shared scorecards and objectives
We share objectives and scorecards with the business enabling a one-truth approach. A key element of this is getting business sign-off on our benefits realisation.
6. Aligned incentive scheme targets with business
We share the gain and the pain. In our incentive programme, all procurement staff who primarily work for a specific business unit are measured against that unit's targets.
The opportunities to step-change procurement's impact are right in front of us. However, we need to look at new ways to make it happen.
Steen Karstensen, CPO, A.P. Moller – Maersk
This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.