The other day I responded to a question from someone in my network who was interested in whether “ownership” of particular suppliers is defined by the sector the buyer is operating in – as if some sectors have a magic ingredient that makes procurement’s role clearer and easier.
This question arises time and time again in my SRM client work. I think it’s the wrong question to ask. If there is a distinction regarding ownership, then we should look at the split between direct and indirect products and services.
Direct materials are typically easier to procure as they usually have precise (and largely unchanging) specifications. Procurement usually operates with a mandate to secure best price, delivery, quality (and so on), the combination of which most closely meets the specification. Relevant stakeholders define the specification, and then get out of the way.
Of course, and ideally, stakeholders are consulted in the development of the category strategy, but it’s most common for procurement to “own” the relationship thereafter.
In respect of indirect services, the focus not so much on cost, but value (not always of course, but often). Desired “outcomes” are presented to suppliers, who then configure their propositions accordingly. With indirects it’s frequently impossible to determine the quality of the service provided until after the work is done – and who’s to say that procurement can make that assessment?
Procurement’s role here could be best guided toward being a “trusted commercial adviser” to those users/stakeholders. I’d argue it’s the latter that have subject matter expertise and who are best placed to manage the relationship post-contract. Of course, those stakeholders need to be competent in relationship and performance management, including having at least a base level standard of negotiation skills, something procurement people can at least provide coaching support for.
In the same way that good procurement people take in interest in what they’re buying, competent stakeholders need to take an interest into how their service requirements are procured.
Procurement as a coach and trusted advisor is far better than a specious argument over who’s in charge
This blog was first published in Supply Management magazine in September 2011.
By David Atkinson