Procurement can be of massive significance to enterprise value and a driver of competitive advantage. The world’s top organisations know this and use it to their advantage.
According to a report by IBM and The Economist Intelligence Unit, which surveyed 1,023 global procurement executives, procurement leaders (or ‘role models’ as they are called in the paper) focus on three different strategies to ensure that they stay at the top of the pack.
By focusing on enterprise success, deeply engaging with stakeholders, and wholeheartedly embracing progressive strategies and technologies, procurement leaders free themselves from the ties that bind them to the more traditional role of support, and allow them to make a real and noticeable difference to an enterprise’s success. When chief procurement officers (CPOs) put these priorities first they not only improve their procurement department, but the entire company.
Let’s dig deeper into the three ways that procurement leaders ensure that they have a huge effect on enterprise success.
1. They focus on the big picture
Procurement role models (CPO companies with revenue and profit performance that put them in the top 10 percent of their industry peer group, according to the survey) don’t just focus on procurement performance but on a company’s success as a whole.
While it is, of course, necessary for CPOs to fully engage with the traditional procurement capabilities, those who also have the goal of influencing and improving the way their business’s operate are of more value to enterprise. In IBM’s survey, 38 percent of the respondents from top-performing organisations said that introducing innovation into the enterprise from suppliers and other sources is among their top three priorities. This figure is in direct comparison to the 20 percent of procurement underperformers (those working for companies whose revenue and profit performance is in the bottom 12 percent according to the report) who stated the same.
In line with this, 42 percent of the procurement role models listed revenue growth and increased competitive advantage in their top three priorities, while only 28 percent of underperformers agreed.
While both role models and underperformers both stated that reducing costs and delivering sustained savings were high priorities, underperformers were found to put the most emphasis on performance basics, such as getting involved in the purchasing decision early, whereas leaders found this to be one of least strategic and tactical objectives for theirs and their department’s role.
Having a more holistic view of enterprise allows procurement to affect the way a company works on a larger and much more valuable scale.
2. They deeply engage with stakeholders
Walk a mile in someone else’s shoes and you’ll get a whole new perspective on things. It's an age-old adage, but according to IBM’s study, underperformers are not taking that wisdom to heart.
A big difference between those companies at the low end of the survey’s performance scale and the procurement leaders is that the latter think about their stakeholders and really value their input.
Procurement works best when it is very well connected to the rest of the company, and this is something procurement role models understand.
Whereas those denoted underperformers have a silo-orientated outlook on procurement’s role, leaders are agreed that good internal interactions add real value.
In IBM’s survey, 93 percent of procurement role models held the view that strong relationships forge shared values, compared to only 72 percent of underperformers. Similarly, 92 percent of the top CPOs said procurement interactions with external stakeholders (those outside the corporate boundaries) add value to procurement, against just 68 percent of those at the lower end of the scale.
Understanding the needs of the stakeholders is crucial to procurement’s value to the wider enterprise. And how best to understand the needs of the stakeholder? By interacting with them face-to-face. Role models do this a lot more often than their low performer counterparts. Thirty-nine percent of the procurement leaders surveyed by IBM said that they have weekly strategic meetings with suppliers, and another 62 percent have weekly or monthly strategic meetings with the line-of-business leaders to whom procurement reports.
Fully embracing the objectives of stakeholders makes it easier for procurement executives to deliver on shared enterprise objectives.
3. They adopt progressive strategies and technologies
CPOs at the top of their game know that staying inside the box is a bad idea.
Procurement role models are linked by their belief that they shouldn’t be restricted to traditional procurement methods, and so seek innovative new solutions.
According to IBM’s survey, procurement leaders are committed to embracing technological solutions and procurement automation and are avid fans of using advanced analytics to inform decisions.
Eighty-two percent of role models believe that procurement technology includes strategic solutions such as supplier management, in comparison to 66 percent of underperformers. Seventy-seven percent also agree that procurement technology is closely linked to standard business and/or procurement processes (compared to 59 percent of underperformers).
Role models also are much more likely to have automated procurement automation than their lower-end-of-the-scale counterparts, with 72 percent stating that procurement actions at their company are automated. Just 47 percent of underperformers say the same.
By fully embracing solutions that deliver enterprise value procurement role models gain a real advantage. With all that free time on their hands, procurement leaders can stride forward with innovative new strategies and procedures, leaving the underperformers in their wake.
So while sustained savings, supply and risk are all incredibly important to procurement success, to be leaders CPOs need to go above and beyond the basics of procurement priorities. They need to prioritise revenue growth while also focusing on competitive advantage and innovation, and they need to stay deeply engaged with stakeholders, internal and external, to ensure they’re on top of everyone’s needs at all times.
Want to find out more about how to stay ahead of the procurement game? Members of the International Marine Purchasing Association get access to a wealth of advice and information in the library and resources section as well as exclusive discounts on training and career development courses. Head over to our website, impa.net to find out more.