Procurement functions are often accused of having their own agendas, and not properly understanding the business functions they are supposed to support. Every function in a company is in the business of creating business value, including Procurement. But what is “business value”?
To some extent it depends on what the stakeholders’ priorities are. Stakeholders are looking to Procurement to bring them the latest insights and approaches from the supply markets and suggest “business value” not yet considered. That requires an understanding of the internal business context and the challenges stakeholders are trying to address. This understanding enables constructive challenging of assumptions. Stakeholders may think they know. But developments and dynamics in supply markets can change fast.
Listen!
It’s key to listen to stakeholders with an open mind – without any Procurement agendas playing in the background. The mind-set of a consultant where you are exploring the issues and devising solutions jointly with stakeholders is very helpful. Think in terms of business solutions – not sourcing projects, at this stage.
Depending on the situation, creating more business value may, or may not, involve driving down costs. In fact, it could involve paying more! In some organisations sources of competitive advantage could come from levering innovation of suppliers better and quicker than competitors. However, in the Business Process Outsourcing (BPO) space, for example, a source of competitive advantage could come from being able to reduce switching costs or manage benefits sharing scheme to encourage cost reduction and process improvements.
Understand internal and external environments
Invest some time in developing your own approach to getting clued up on supply markets and stakeholder challenges quickly. You cannot know everything, so a process that quickly provides you with the right level of insights is very valuable.
The key here is to use everyone else’s knowledge as a first port of call. Find out what stakeholders and top suppliers know and understand. Build from there with additional targeted research if needed. This is not only a time efficient way of getting insights. It also strengthens relationships, and puts you in a better position to know what stakeholders are thinking.
Procurement professionals that think and act like business people are extremely valuable to their organisations.
Armand Brevig is the Managing Director of Procurement Cube. We have created an effective and lean Procurement product that unlocks hidden business value for SMEs. It’s a Procurement Powerhouse inside your organisation that delivers Value for Money, Total Cost Control and Enhanced Competitiveness. The approach builds fit for purpose capabilities that deliver sustainable strategic value. The focus is on what really matters in your unique situation.
