A common procurement function is to acquire goods and services for business, wherein the activities involved in it are operating within a limited mandate. This should be seen and positioned as a more valued part of the company, with a strategic role at the top.
Finding CPO’s or commercial experts who have operated at a managerial level over a cross-section of businesses and discipline will help increase the procurement level and awareness within the organization and also help business owners realize the need for it.
Organizations need to understand the broader offerings of what procurement could be, and the further benefit it could be to the entire business. They need to place procurement in a similar fashion to the role of a strategic commercial director and viewed as a function that is strategic and commercial, rather than just transactional.
Traditionally, procurement was seen as a subset of the finance function. A top-notch procurement operation is seen at the same level, as a peer to finance with its own authorization to help and support the business. Here, we list a few tips that make your procurement a world class function:
- Spend on experience and benefit from the culture of what a strategic procurement function could look like, against what the company has got used to over the years. Costs will be reduced when an efficient business case is addressed.
- Need to ensure the correct people are in place with relevant cross-industry experience in procurement, multi-disciplined experience in having a strategic oversight of the company and its enablers, and aligned with key participants and business influencers. They need to know and appreciate the value creation and risk mitigation it presents and support the procurement strategy to the core business strategy and its key drivers.
- It is important to have an end-to-end authorization to achieve successful and strategic partnerships and collaborations. A typical procurement function has a brief to provide services in certain areas of expenditure and essentially does have a wider reference to more strategically beneficial areas such as restructuring, organizational downsizing, major profit improvement initiatives and outsourcing.
- Looking at the cost of a product right through the end-to-end supply chain process, the procurement function can also extend to areas such as increasing more strategic partnerships, to including risk-reward mechanisms, award innovation, and creativity.
- Need to arrange your team so that it is aligned to the strategy of the company and its functional directorates and appropriately up skilled and resourced to be able to execute the procurement strategy.
- Board members have to control the procurement budgets and own their lines of business. They need to ensure the procurement strategy is aligned with the company strategy of the key influencers.
- Businesses need to be clear on how to extract the maximum value from supplier relationships through improved performance measurement and potential development.
- Procurement strategy has to define how to maximize the value from possible suppliers and business partners in placement with your business strategy.
Business is getting harder day-by-day. It is crucial to make sure that management understands the business case and is on a path to understand and embrace procurement, ensuring the capability is used and perceived in the same way as finance etc.
Organizations have to realize that procurement needs to be operating at the heart of the business. It is important to have an aligned and strong procurement team with well-organized processes in place to ensure that procurement earns its place at an enterprise board level.
Businesses need to focus on the personal and professional development of the procurement team and ensure a comprehensive change management program is in place. Having the right operating model along with advanced procurement software is a good start.
In order to achieve this, organizations need to identify and understand where the procurement function currently sits and operates in the business, and have visibility of other organizations and expectations within the industry that they are operating in.
Robust analytics need to be established to have visibility into the transformation steps needed to reposition, restructure and estimate the procurement propositions. With the values of keeping it simple and fit for purpose, whilst ensuring the specification reflects the business need.