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Procurement's perceptual problems no more?

Guy Strafford
Aug 18, 2015 9:57:00 AM

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Influence, commercial sense and excellence

The procurement community has long bemoaned its internal reputation as a relatively un-strategic cost centre. While that reputation has been, at least sometimes, well deserved, the promise of an innovative procurement programme offers benefits well beyond purchasing discounts. 

Well, the times, as they say, are a changin'. Procurement executives are beginning to see their role as a driver and contributor to corporate commercial goals and fiscal health. Perhaps even more exciting – and, admittedly, slightly surprising - is that many executives are also praising procurement’s strategic value to the organisation.

According to a recently released Intesource survey of procurement and sourcing professionals, 65% of procurement teams believe they are viewed as strategic, with significant executive support and enablement. Perhaps the reason for that can be found in another statistic from the same report, suggesting that sourcing has moved beyond its reputation as a purchasing department: 62% of respondents report that their sourcing strategy has had a positive impact on margins, working capital, profitability and cash flow.

The executive yardstick for measuring procurement success has almost always been cost savings (after all, executives will always seek cost-savings from a cost-centre, especially when purchasing is central to that function). We’ve long argued, however, that value is the truer measure of procurement success: How well does the procurement function choose and manage an increasingly important and decentralised supplier network? How effectively has procurement enabled increased efficiencies within the organisation? Has procurement’s management of the supplier network enabled business peers to focus on the commercial goals of the company? And perhaps most importantly, have the cost savings achieved been earmarked as money to fund strategic investments?

Of late, we’re hearing many more yes’s than no’s in answer to the latter question. To that point, 46% of survey respondents did indeed say that their sourcing programme helped their organisation find new money for strategic initiatives.

Certainly there are still internal roadblocks preventing procurement from receiving across-the-board recognition as a strategic department, but thanks to the function’s own transformed goals and measures for success, the tide is clearly turning.

The challenge now will be for procurement to maintain its earned status. Future success will depend on the next generation of procurement executives. As the survey suggests, with all of procurement's recent perceptual wins, the department still faces clear talent gaps when it comes to data analytics. Today’s leaders, would, therefore, be well served to cast a wide net in recruiting tomorrow’s executives; looking for non-traditional technology backgrounds, as well as those skilled in managing an increasingly complex supplier network.

If procurement can successfully negotiate its recruitment needs, it’s well positioned to further shed its long-term perceptual problems – perhaps leading to a long-awaited (and deserved) seat at the executive table.

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