The difficult task of staying relevant: A Procurement story

The procurement function is changing. Traditional ways of managing transactions are becoming obsolete as technology keeps evolving, and processes that used to be manual are increasingly automated – opening up new possibilities for procurement to fulfill a more strategic role. If this is so obvious, why is it so difficult?

Procurement is, in essence, serving the internal customer. Therefore, to be successful, no procurement organization can survive in isolation.

Stakeholders expect high value from procurement – and this is not measured purely in savings. Value may be created by introducing innovations, by gaining superior market knowledge, by managing and developing supplier relationships, by focusing more on quality and so on.

It is imperative that procurement cooperates with stakeholders to ensure there is a common and shared understanding of how value should be defined for each category, and that category strategies are defined accordingly.

Easier said than done

After working with several procurement organizations it has become clear to me that, in many cases, change can be quite challenging – even when the overall organization agrees that it is needed. The reason why it is difficult is because it touches on several areas that all need to be considered.

  1. Transparency: The basic knowledge of what is being bought, from which suppliers and for what purpose can, in reality, be very difficult to obtain. Moreover, its value is generally underestimated. Thus, we see procurement organizations trying to operate more strategically without really understanding their starting point.
  2. Capability development and training: The anticipated change normally requires a whole set of new skills. It involves not only knowing about procurement, but knowing about the products and services, and their market. And as it’s quite rare to find a person who is capable of ticking all the boxes, training becomes increasingly important.
  3. Collaboration with the rest of the organization: As mentioned above, no procurement organization can survive in isolation. Procurement can develop the best processes and negotiate the best contracts, but if the stakeholders are not on-board, it means nothing. This is why it’s so important to establish good cooperation right from the beginning. Moreover, measuring the joint achievements gained by procurement and communicating them to the rest of the organization is also a good way to prove procurement’s value contribution.

So, what’s next?

Do your homework. Start thinking about how to deliver true value for your company, in which direction to take your procurement organization, and where you stand at the moment. And while doing this, don’t forget to cooperate with your stakeholders.

Understanding your biggest needs will guide you on where to start. In this respect, we have seen that many of our clients value having a third party opinion – gained, for example, by carrying out Procurement Maturity Assessments or requesting support in developing category strategies. But in any case, it is imperative to start transforming now – to stay relevant, and not become obsolete.

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