Many of the meetings I’ve been having lately have included a discussion on procurement. What is surprising is that the views expressed are extremely consistent. What is unsurprising is that this conversation tends to occur when procurement people are not in the room.
With an angst often associated with arranged marriages, marketing, marketing services and professional services clients complain bitterly about the procurement teams with which they increasingly have to work. There is no doubt that the recent recession has elevated the importance of a formal purchasing function within most organisations.
There are some recurring themes – the procurement process is slow and pedantic (business needs to be fast and agile); procurement is impersonal (human beings need physical contact to establish if they can work together); procurement people aren’t that smart (unlike us, of course); procurement teams commit only to chasing cost reductions (a path to diminishing returns and neglecting the superior though less tangible impact of value).
These are very real frustrations. And the introduction of ever more sophisticated technology, applied to procurement and supply chain operations in areas like data analytics, runs the risk of mechanising the process even more.
There is another side to the coin, however. All procurement people are not the same – for example, there is a growing number who embrace the wider commercial imperatives of a business. Also, many of the prediction junkies in the procurement press are citing the increased regard for supplier relationship management (SRM) as a means of encouraging meaningful, collaborative involvement in managing a series of interactions rather than, at worst, one-off sourcing ‘events’.
In addition, steps are being taken to attract better talent into procurement and there is even talk of improvements in the much maligned relationships with marketing, although there are still vital steps to be taken in aligning the two agendas.
As an independent consultant, specialising in relationship management, I do advocate that proactive relationship behaviour can play a key role in improving the interface with procurement, both internal and external. Spending time in their shoes as a precursor to explaining your services and demonstrating the value that you add will be appreciated. Procurement people are often unfamiliar with the arm of friendship and can become advocates if they ‘get’ you.
But I am not naïve. I have read nowhere any hint that cost savings will cease to be the top priority for procurement chiefs. While this remains such a dominant objective, the best a strong relationship can expect is to guide the red pen rather than have it replaced by a less brutal instrument.
One of the best insights into an organisation is how its employees are incentivised. Work with this and anything is possible, attempt to fight it and there will be a mountain to climb. In the context of procurement, this is where both the problem and the opportunity lie. Fortunately there are some truly enlightened leaders who recognise the truth in Victorian art critic John Ruskin’s famous quote: “It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money – that’s all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do.”
Therefore, if the fundamental objective of procurement is to get the best from colleagues and providers alike, then the benchmarks set and the incentives offered need to reflect a wider understanding of exactly how this is achieved.
And Peter Smith, Managing Editor of Spend Matters UK/Europe, interviewed for the Next Level Purchasing Association blog on 2015 trends, seems to agree: “To me, the fundamental struggle for the soul of procurement is to move away from an obsession with cost savings to something that is focused on shareholder value and a broader perspective that looks at the contribution we make to revenue, to innovation, to internal efficiencies, to brand and corporate reputation, to risk mitigation…etc. HR has a huge focus on getting the best people in key roles (not the lowest cost people) – we should be about getting the best providers in key supply areas.”
I couldn’t have put it better myself!