Procurement 2018: Getting off to a great start

You lead a procurement function. You worked your butt off in 2017 to hit your savings target, and improved supplier performance through your SRM efforts. Those SRM efforts stretched to improving your key supplier’s business operations, and you secured the lion’s share of the benefits that accrued from that support. You also improved your procurement practices, perhaps revisiting your category management and SRM policies and processes, as well as embedding digital technology to improve P2P efficiency, manage risk, and oversee that supplier performance. And you invested in training and other support for your team, which is now more competent and confident that it was twelve months ago.

Now you’re going to have to do it all again.

After weeks of effort last autumn assessing each spend category’s scope for further savings, your budget is agreed (at least, after the CFO ‘stretched’ your target to ensure no complacency or sand-bagging crept into your forecasts). You’re not delighted by that stretching but, (like most procurement leaders) you’re inherently optimistic about what can be achieved with a blend of forensic analysis, determination, and an ambitious team who are eager to demonstrate the contribution Procurement can make to the success of the organisation. Who knows, maybe this year, the function can at last be recognised as the respected strategic contributor it surely is?

However, despite last year’s success, and the quality of your team, you have a nagging doubt that more or less repeating what you did in 2017 isn’t going to deliver the numbers, and the recognition that would make this year a bumper one for the function. Other procurement leaders in other companies and sectors appear to be making even better progress, some even winning plaudits (and prizes) from fellow-professionals during the awards season last autumn. For one reason or another, their practices are considered more cutting-edge, more sophisticated, more respected by their stakeholders, and their success looks that little more sustainable. You know standing still isn’t an option, and you want to get the new year off to a great start. The good news is that between portions of turkey, your over-indulgence in confectionery and the fizzy stuff, you had moments of reflection in readying yourself for your return to the reality of the office, and you’re intent on ‘hitting the ground running’.

Becoming ‘client-centred’

The first thing you concerned yourself with (while munching on a mince pie) was whether you have been business-positioning Procurement appropriately in the organisation. Of course, you and your fellow pros have all, in the preceding years, been to ‘Procurement School’ and are well-versed on the whole suite of procurement methods and tools, and you know procurement of goods and service from third-party suppliers and providers is important work. Yet, in your positioning of the function in the organisation, you find it hard to shake-off the labels of cost-savers and deal-makers, despite your best endeavours to be recognised as experts in securing value for money, innovations from the supply chain, and being sophisticated managers of complex, sometimes critical relationships. You realise that, this year, you’re going to refresh the mission and purpose of the function, so your team (and its stakeholders) are clearer than they’ve ever been in recognising that Procurement is no humble back-office function, and that it should be much closer to heart of strategic business decision-making. Defining a new and clear mission and purpose for the function won’t take long, but you recognise the sooner you get it communicated to (and negotiated with) the business, the more productive your team’s working with stakeholders will be.

So, improving Procurement’s impact with stakeholders (your ‘clients’) is a key goal for you this year. You already know that it’s become a priority for many leaders over recent years, as the competitive advantage of the business has become increasingly acknowledged as being dependent on how well supplier inputs are managed. Still, there are some stakeholders who don’t appreciate Procurement’s contribution, often showing impatience and frustration with the function’s business processes (bureaucratic, as they see it). But bleating about being under-appreciated is not going to get you and your team very far. You’ll need not only to ‘up your game’ with stakeholders, but also to invest more time in relationship building and, crucially, to more deeply understand how Procurement can help those stakeholders become more successful in doing their jobs.

In fact, your buyers are going to have to become competent ‘sellers’, not pushing or imposing your category management practices on others, but rather in much better understanding the expressed and unexpressed needs of those stakeholders. You’re certain that your team are going to become even more ‘client-centred’ than they were last year, and that the ‘voice of the client’ is going to an even more important influence on your team’s work.

You recognise that the more your team is able to demonstrate to stakeholders that they understand their needs, and what they’re tasked with delivering for the organisation, then your team will be more successful in developing tailored value propositions for each stakeholder group. Your team will recognise that it isn’t about them (trumpeting savings) and more about the stakeholders; those that benefit from the work Procurement does.

You know that the procurement role is destined to become one of advisor (or ‘consultant’), skilled in listening and influencing, even persuasion; and your team members are going to bring more emotional intelligence to their role. Meantime, they’re not going to forget their technical procurement skills, and the need for those to be continually developed too. If you get the blend of ‘soft’ and ‘technical’ skills right, then this year they are destined to become more trusted to make a positive and valuable contribution to their stakeholder clients’ day job. Not only that, but Procurement will have a stronger voice of its own in challenging specifications and optimising demand for sourced items. Everybody wins.

Now that you’re clearer about how you’re going to ‘pitch’ Procurement to the organisation and how your team is going to be even more client-centred, your thoughts turn to the Procurement ‘day job’. You will ask about how effective are our practices and our tools? What are we particularly good at, and which practices need improvement? What do we need to excel at if we’re going to inspire the organisation to enthusiastically work with us?

Excelling at the day job

Your thoughts will turn to your category management process – how well is it modulated to accommodate major categories that get the ‘full treatment’, whilst guiding category managers in executing an expedited process when urgency must overtake the ideal approach? And you’ll reflect on how well the process is well-governed, whether you’ve established an appropriate degree of formality around ‘gate reviews’? And you will be thinking about how you can get key stakeholders more actively involved in strategy development and that governance, because you know best practice sees category management as a cross-functional endeavour.

Savings delivery is a priority your expectant CFO isn’t going to compromise on, and you’ll be aiming to ensure that you have identified savings projects that can be accelerated, alongside the phasing of others so that fiscal impact can be maximised. Similarly, you’re wondering whether your post-contract management of suppliers is as good as it could be. Last year, your SRM efforts were mainly characterised by regular performance reviews, intended to ensure your key suppliers remained focusing on providing what you’d contracted-for, but you have a nagging doubt over whether you and your team have been sufficiently diligent in maximising the potential value available from those key relationships. You know you can do better (other organisations, and research studies, regularly suggest additional value from SRM in double-figure percentage terms), so one of your priorities is to explore the possibility of embedding an improved approach to SRM, one that reflects your team’s capacity and current level of competence, and those of stakeholders who you think could play a more active role in managing key supplier relationships.

If you haven’t already done it, you’ll be thinking about removing ambiguity on the claiming of savings by involving Finance in validating the outcomes of each project and contract negotiation. The last thing you want this year is to have your team’s best efforts disputed. You’ll also ensure that non-price value improvements are rigorously tracked and acknowledged by those stakeholders who are impacted. Measures like product or service delivery, quality, lead-time, risk mitigation, supplier innovation, and others will come under similar scrutiny as savings. After all, your conversations with peers on the contribution Procurement is making to the organisation will be a lot easier if you have the data to back it up.

Competence development

You have some great people, experienced and skilled in their varying procurement roles. You’re a little concerned about how you’re going to accommodate their personal desire for career advancement by ensuring they have a pipeline of important projects that will challenge them to grow professionally. If you’re located in an employment hotspot like London and South East of the UK, retaining your best people is an ever-present concern, not least because the success of your function is crucially dependent on those responsible for leading key category and SRM projects. Switching category managers in and out is a disruptive distraction.

You’re not just going to throw salary increases at them (as if you could!), but you can control what training and development opportunities are available to them, so you’ll be thinking about which parts of their ‘day job’ require skills development, from technical procurement methods (negotiation, SRM, etc.), through to skills in being an effective advisor (internal consultant, if you like). Your success with internal stakeholders (and your organisation’s other senior executives) depends on Procurement providing outstanding performance in its core activities. After all, weaknesses in those core procurement activities will do nothing for the credibility of you and your team, and will certainly leave the function overlooked when the plaudits (and bonuses) are handed out at the end of the year.

You would dearly love to build a reputation of your organisation being a great place to work for procurement professionals, as this not only helps you retain your high-performers, but attracts others seeking to improve their practice and develop their career. You’ll know that some organisations, sometimes even in the same sector, have been more successful in recruiting and retaining the best talent around, and you already appreciate that your personal success as a procurement leader is significantly based on the talent you can surround yourself with. So, this year, you’re going to ratchet-up your attention to people development. It’s not going to be about doing the minimum to ‘keep them happy’, but instead, you’re going to go beyond the cliché “our people are our greatest asset” and do some proper investment.

Back in the office

Now you’re at your desk, having thought of all the things you can initiate, re-fresh, or re-launch in the first few weeks of the new year. Your team is a good one, and last year performed well, despite the occasional setback. When it comes to this year, all your ideas may not amount to a ‘transformation’, and you think modestly that an incremental build on your recent successes represents sufficient progress. But one thing you are determined to achieve is that at the end of 2018, your own, and your team’s reputation is going to be significantly enhanced. And that is going to come from, not only you delivering the financial performance that is expected, but by being better at your job than you all were twelve months earlier.

Good luck, and have a great 2018

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