Why your next great strategic advisor should be your procurement team

By Joe Kennedy and Julia Hensel

According to a recent Gartner survey, 66% of CEOs are likely to change their business model in the next three years. With this much change in the air, it’s time to examine how your procurement organization will support deep structural change and growth.

Is your procurement organization ready to adjust to news ways of thinking, new technologies, and the new skills that are required?

Many procurement organizations of the past didn’t have clear objectives that tied to their organization’s strategy. The team’s efforts may have focused exclusively on cost and served in a more transactional support role. But, this world is changing.

An evolved procurement organization focuses on value and partnership

So how do you shift your business? Today, we’ll unpack key areas to focus your early efforts: building partnerships and aligning to value.

By investing in cross-functional partnerships and more clearly tying their vision to the organization’s overall goals, procurement teams can evolve to become strategic advisors for leadership and key drivers of value universally.

First, reinvent partnerships with your stakeholders

Often, organizations try to solve their procurement challenges in silos (such as business unit, geography or function). This is understandable — it is much easier to focus on the needs of a business unit versus the needs of the organization as a whole.

However, this approach has its limitations. As vendors often work throughout multiple silos, procurement misses an opportunity to drive value by looking holistically at how the organization can get the most out of its vendors. By fostering strong internal and external relationships across the organization, procurement can ensure that their stakeholders have the right vendor partners to realize their future goals and obtain the most value.

Take the time to enhance, rebuild, and repair (where needed) relationships with your stakeholders first — or you may risk standing in one place and not progressing.

To help revive these relationships, procurement leaders can share their transformational journey with their cross-functional peers and demonstrate how their vision is tied to the goals of the business. Ask for feedback and be open to modifying the course. Be open to feedback, listen to what the business stakeholders have to say, and take action to show your willingness to build a true partnership where one didn’t exist before.

Then, align your priorities to the priorities of the business

Clients often ask, “How can I excel in all facets of source to pay while serving as an advisor and improving efficiency?” The first question I always ask in return is, “Why do you need to excel in all areas?” Depending on your strategic goals, your organization may not need to dedicate the same amount of energy to supplier selection as ordering materials or accounts payable.

Here is a quick exercise to help you find your answer: Categorize your key processes into three buckets, as shown at right.

Focus your effort on excelling in processes that are strategic to your organization

Strategic — Processes that drive a competitive advantage or unique customer experience

For example, food manufacturing companies would likely have supplier selection and contracting in this category. Having the best ingredients and diverse supply base to manage through supply chain risks is a critical element for food manufacturing companies to ensure ultimate customer satisfaction.

Core — Processes that drive efficiency or align to industry standard

Ordering materials is a good example of this category. For these processes, it’s important to be efficient and easy to work with, but the ROI on large investments to make this process leading edge can be hard to justify.

Foundational — Processes that fill operational needs but don’t require a competitive advantage

Accounts Payable is a good example of this category. These processes need to be at least operational, but there are other processes that require more attention and drive advantages.

Categorizing your activities as strategic, core, or foundational will allow you to focus your effort on excelling in processes that are strategic to your organization.

Keep in mind that it is not critical to be mature in all areas. Instead, identify where you need to be leading and ensure you have the right resources and culture in place to be successful.

Procurement is a critical component within the value chain. It’s time for organizations to view it as a strategic partner to efficiently run and push the business. With a shift in mindset, you can create an infrastructure that is ready to adapt to change in the dynamic environment we operate in today.

Where are you at in your procurement journey? Reach out to me and share your thoughts.