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"Procurement and finance have developed separately, with different and sometimes conflicting KPIs, reporting to different areas of the business – and in many organisations, now operate entrenched in their own siloes," wrote Ellen Leith, editor of Accounts Payable News in a recent blog post on Procurement Leaders.
This separation - one that has dogged many functions over the years - has meant that procurement is often left out of programmes run by finance until the very last minute, where if it had been brought in earlier could have added significant value and secured cost savings.
This was a trend highlighted at The Economist’s recent CFO Summit 2014 held in London. One finance chief told me that, in his experience, procurement was often brought into projects too late and when they did come in their presence often increased the tension in negotiations and placed the focus firmly on costs.
He did, however, recognise that collaboration between the two functions could be more effective. "If we think more strategically the benefits can be a lot more significant for the business," he said.
While it is easy to say these silos should be broken down, many procurement and finance chiefs will wonder how they can do this after so many years of being separate. Crucially though, it’s not just procurement that’s considering where bridges might be built; the discussions at the CFO Summit revealed some potential areas of collaboration.
Beyond reducing costs and improving business performance, CFOs discussed how they were looking at how they can utilise Big Data and reduce the costs of doing so, as well as how to make function transformations more effective and less disruptive.
With procurement teeming with data from the supply chain, a developing sense of how to use, display and reduce this cost of this, alongside having gained valuable experience of function transformations over the last few years, the opportunity is there to expand collaboration.
By offering its advice and solutions in these areas, procurement can become finance’s new best friend and will find itself invited to the table when the function is starting up one of its own projects.
Clearly, years of noting savings, while not unimportant, haven’t done much more than get a foot in the door for procurement. The next level to this relationship involves procurement teams using the data they have to demonstrate value in other ways, like providing forecasts or collaborating with suppliers to provide innovation to business counterparts.
What my trip to the CFO Summit made clear was that there is willingness to listen and a stomach for change among finance chiefs. Still, it will be up to procurement to be the initiators and to learn how to demonstrate the value in the function to their counterparts down the hall.
To find out more about utilising data to help your function become a strategic business partner, read our series: thefinancialcpo.com