Procurement has evolved to become more strategic and collaborative and has moved from an isolated, back-office function to a boardroom partner. While the procurement function must continue to drive hard savings, manage suppliers and mitigate risk, it must also pivot to look for opportunities to deliver future savings and innovation.
“Procurement is at an inflection point,” said Dr. Marcell Vollmer in an interview with SIG CEO Dawn Tiura. “Procurement needs to transform into a value-added function focusing on strategic tasks.” How can procurement teams do this?
Based on interviews with today’s leading procurement executives, innovative suppliers and academic research on the procurement function, five notable areas stand out in which procurement can drive innovation in areas critical to the sourcing industry.
INVEST IN THE RIGHT TALENT
For all the great advancements that technology brings, it requires people to manage the technology. Oxford Economics’ survey among procurement executives and practitioners found that the top three investment priorities include new talent recruitment, training/upskilling programs and procurement/supply-chain technology.
The rapid digital transformation in procurement has contributed to a skills gap and organizations are shifting resources to align procurement skills and talent with changing business needs. The strategies outlined by high-performing procurement leaders is clear, but many feel their teams lack the ability to deliver on those strategies.
“Technical skills can be learnt, but above all build a resilient team with diverse personalities and have fun along the way,” says Patrick Dunne, Director of Group Procurement and Cost Base Transformation with Sainsbury’s in a quote from the Deloitte Global Chief Procurement Officer Survey.
Research shows a direct correlation between stronger leadership capabilities, higher spend on training and enhanced performance. Organizations that invest in employees’ professional development and training will outperform organizations that do not.
For procurement teams to remain agile, they must find ways to implement digital technology that will provide increased transparency and automate menial tasks to allow teams to be more strategic while also reducing operating costs.
“You take bolder actions and adopt a more transformative vision with technology-enabled projects, unleashing your team’s creativity and forcing decision-makers to articulate what matters,” says Ryan A. Murray, First Deputy Director in the Mayor's Office of Contract Services for the City of New York.
CPOs and their teams must reduce time spent on operational activities and manual processes that add limited value to the business and distract from more important responsibilities. They can do so by making sure investments in technology are balanced with investments in talent that possess the skills required to understand and use the data.
COLLABORATE WITH SUPPLIERS
The ability of procurement leaders to leverage soft skills—such as negotiation, relationship management and conflict resolution—with technical expertise will bridge the gap between the boardroom and the back office and will position procurement as a trusted advisor.
Soft skills are also important in Supplier Relationship Management (SRM). Open communication sets expectations and can mitigate risk when disruption is on the horizon. Additionally, because procurement owns the relationship with suppliers, they can drive innovation.
Seventy-four percent of respondents in the 2018 Hackett Group Key Issues Study acknowledges the importance of obtaining more value from existing suppliers through SRM, but 51% have only a low or moderate ability to meet this objective.
MANAGE FROM A RISK PERSPECTIVE
“If you’re not managing from a risk perspective, you’re missing so many opportunities,” says Tiura. “It gives you an opportunity to collaborate and get closer to your providers and suppliers and provides the ability to drive change through that closeness.”
Third-party risk management, in particular, is becoming more than just a buzzword, it’s top of mind for both executives and consumers. And with nearly 25 million people trapped in forced labor, it’s something that can no longer be ignored. “There are a lot of great resources around the world and third-party resources can ensure supply chains are safe,” says Tolga Tomar, Director of Procurement at Thirty-One Gifts.
Importantly, procurement teams must clearly articulate to stakeholders the benefit of managing risk. The Hackett Group reports that zero percent of respondents surveyed gets hard-dollar recognition for avoiding potential profit impacts, which is why protecting revenue and brand integrity, along with supply risk management, should be included as a value-contribution beyond price reduction.
By focusing on areas outside of cost savings, identifying key performance indicators that align with the strategic goals of the business and leveraging supplier relationships, procurement teams can drive performance outcomes and educate the entire organization on the value that procurement brings to the organization’s bottom line and its reputation in the market.
Want more thought leadership on topics like this? Future of Sourcing publishes the latest content for the opinion-formers and decision-makers at the heart of the global sourcing community.