What is important for procurement today?

by Patrick D. Mitchell
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Procurement strategy
Procurement has come to manage almost 100% of business cost structure in those companies where it has evolved into a strategic lever.
 

WASHINGTON — When it comes to transforming procurement today, advice generally centers on a few simple and standard business concepts like strategy, relationships and technology enablement. At forums and on webinars, the same recurrent themes emerge — that procurement: “… is in the relationship business,” that procurement “needs to develop its digital core,” and that it “needs to better align strategy with its stakeholders and suppliers.”

Attending and speaking at several procurement forums myself over the past year plus, it’s been suggested to me that while not overly complicated, the messaging around the topic needs to be simplified further and translated into something meaningful to the entire procurement community. That the “day job” for buyers and their leaders is trenching through the muck and that the “night job” is catching up with what was missed while in the muck. This routine relegates the time needed to think about transforming procurement to a “side job,” so what can we/you do to make procurement strategy clear, concise and actionable?

The challenge with making “what is important to procurement today” clear, concise and actionable, is that there isn’t “one source of truth” for charting this path. There are many procurement leaders across different industries, channels and geographies. There are many consultants who advise them. And there are many experts who write and speak on the subject. From this diverse group comes a multitude of approaches to and themes about what is important for procurement today.

In this introduction and brief series of articles that will follow, my objective is to deliver a message that is important and relevant, presented in a manner that is simple, clear and meaningful. The objective is that readers from the grain-based foods industry will easily be able to relate to what is written, and importantly, translate the content of these articles into what is important for them today.

The premise for this set of articles is the notion that there are four core elements that are most relevant to what is important to procurement today. These elements help establish a working framework for procurement regardless of industry segment, where you are located and doing business, or frankly who you are in the procurement community. In an attempt to demystify and simplify the content of each element, the articles will approach them by presenting a set of “procurement myths,” which have become relevant to procurement as it has been positioned.

Procurement has come to manage almost 100% of business cost structure in those companies where it has evolved into a strategic lever. It normally takes heavy investment on the part of the company to get to that point, and there are good reasons behind the company’s choices as they’ve made these investments. In the end, “what is important to procurement today” must be “important for the company today.” As we cover the context and content of these four elements over the course of the upcoming articles it will become clear why they are important to procurement and the company both.

The ‘4 myths’ regarding procurement

Four popularized myths regarding procurement have gained traction over time and have nearly become institutionalized. Grounded in relevant business fundamentals, the content of the myths have come to widely define procurement today. In this writer’s view, all are flawed but still in some way strike a chord. Reshaped and cast in a different light, the myths provide relevant and useful insights that could be helpful with transformational change for procurement. It is with these insights that we can bring simplicity and clarity to four elements that provide the content for “what is important to procurement today.”

The first of these myths relates to organization — where procurement fits in a company hierarchy. As the myth goes, procurement must “have a seat at the (management team) table” in order to be relevant and successful. Procurement’s journey to today has been marked by a significant rise in both credibility and influence and must be an equal and relevant c-suite player in order to sustain this trajectory.

Yes, procurement needs to be a powerful voice in a company’s strategy development and execution, but, no, procurement does not need a seat at the table to accomplish this. Procurement simply needs great leadership, and with great leadership procurement should be able to sustain what it has gained and should be able to remain on a trajectory of relevance and success within the company.

The second myth relates to the value of strategic sourcing as the foundational core for procurement. As the myth goes, the act of “buying” has advanced to the “art of strategic sourcing,” representing how far procurement executives have progressed from “being just buyers.” Companies that have invested in strategic sourcing roll-outs in procurement today likely have been able to mark success by surpassing their initial cost savings targets. These same companies have shown a willingness to broaden procurement’s influence across the P&L (profit and loss).

Unfortunately, too few companies have been able to sustain strategic sourcing and recognize value beyond initial targets, and even fewer have leaped beyond basic strategic sourcing into “category management,” which for this writer is the true “foundational core for procurement.”

The third myth is that finding procurement talent is overwhelmingly difficult. There has been a protracted “talent war” for years among companies looking to rise from good to great when it comes to leveraging procurement talent. Following this myth, companies will rise from good to great, leveraging a talent laden procurement organization that will deliver significant value to companies through brilliant strategy development and execution.

Frankly, talent pools never seem adequately stocked, and we constantly complain about talent while continuing to seek perfect solutions. It is the writer’s view that there is great talent to be found; we just need to know what to look for, and we need to recognize that procurement isn’t rocket science. The time is at hand when we need to recognize that the obsession with great procurement talent is flawed and that for success in the future, we will value a set of targeted capabilities that initially will fill voids and eventually build a new talent foundation.

The final myth centers on the connection between procurement internally with its stakeholders, and externally with its suppliers. As the myth goes, the evolution from strategic sourcing to end-to-end category management requires connections at the front end (internal clients) and at the back end (suppliers). This writer prefers to think of the connections as “mutual partnerships,” partnerships that leverage an equal “skin in the game” relationship between both partners. As businesses within companies continue to outsource more and more to procurement, procurement must be able to translate a company’s goals (front end) into its daily execution of strategy. And as procurement evolves from simple supplier performance management into something more valuable to both the company and the supplier (back end), the value proposition must be founded on defined mutual investment and reward.

The ’four core elements’

What is important to procurement today? It is leadership, category management, capabilities and mutual partnerships. These may be relatively simple elements to define in general terms; however the writer contends more difficult to conceptualize within the context of what is important for procurement today. The four may sound very similar to the myths we’ve been living with, but they are different. They are different enough to make a difference for procurement today and tomorrow.

The articles over the next several months will bring simplicity and clarity to each of these four elements from a singular perspective. We will explore them in terms of the value to procurement and the value to the company, answering the question “why?” for each. When the context and content are provided around the four elements, readers should be able to develop a clear framework for what is truly important for procurement today and why.

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