Procurement leaders in 5 steps towards strategic business impact

Basically Business leaders and Procurement leaders agree. There’s space and the necessity to grow the strategic impact of Procurement on organizations. In many cases this means a challenge for Procurement and business. Today’s dynamics are taking more out of Procurement leaders and doesn’t make it easy to provide the means to the process towards more impact on the business successfully. What stage is Procurement at today and what steps have to be taken and what hurdles have to be overcome on the road towards Procurement’s optimal strategic impact on the business? Worldwide publications and surveys of business leaders and Procurement leaders looking at the state of actual issues at Procurement has resulted in the definition of 5 steps towards optimal, organization made, strategic Procurement. Hereby the hard choices that have to be made to develop towards the next step are essential. Where is your Procurement organization and how will the next step be reached? Do Procurement and above all the business a favor with a concrete plan through the 5 stages.

 

Step 1 “Operational Excellence” you have to realize an outstanding and obvious control over operational/tactical Procurement performance. This is basic hygiene of Procurement. When business problems arise at this level it will frustrate the development of Procurement and therefore the impact on the business. Ask yourself the following questions; “Do you achieve or exceed the Procurement goals (often costs & availability)? Do the processes make sense, optimally supported by digitisation and does the business percieve the processes as supportive? Are your priorities in line with the priorities of the business? You score extra points when the supplierbase shows a high level of flexibility to meet the changing customer demand and when you got risks of unexpected economic or market trends under control. Step 1 is difficult and complex, even when  in many cases this involves the comfortzone of Procurement. It’s easy, perhaps even tempting to stuck to this step. There’s always something and you could always do more. Achieving a sense of obviousness in the organisation is the base for the next step. The less we talk about it, the better it is for the further development of Procurement. Break through the framing of Procurement as an operational/tactical discipline.

 

Step 2 “Strategy organisation” means that you have to get out of the “cocoon” of “operational excellence”. You have to get the picture of the dynamics of the market and the position of your organisation in the market. How do the customers of your organisation look like and what are the opportunities and threats for your organization? What’s the strategy of your organisation? Are there new technologies and arise new business models in the market? How about economic and or (geo)political develoments important to the performance of your supplierbase? If you don’t know what’s going on in the world that matters to the strategy of the organisation, you can’t join the conversation and come to initiatives. The greater the the dynamics in the value chain in which your organisation operates the greater the importance of strategic Procurement and therefore the “Business Connection Procurement” (BCP). Without connection with the business, no strategic impact. Your identification is the base of the Procurement strategy focused on the developments of the organisation in today’s world and the world of tomorrow. It’s important to define conditionally the level of “BCP” that you have to realise. Certainly this isn’t an end in itself, but a goal based upon the specific interests of the organisation.

 

Step 3 “Competences professionals” is about the most important condition to develop the “BCP” and that’s the behaviour of the procurement professionals. Growth towards “self conscious” Procurement. Greatest steps towards impact on the business can be taken by the development of the competences of the professionals. Define what competences are important to what extent. Assess, preferably by measuring,  the competences present of the professionals and identify the possible gaps. You have to know that the biggest difference in competences required for certain profiles is between operational/tactical on the one hand and strategic on the other hand. Make a development plan for the professionals and consider the successful execution as the priority to make any progress. May be you have to hire some competences external, permanent or temporary. Make the department interesting for talent. Without the right competences it’s difficult if not impossible to realize intrinsic sustainable development of Procurement. Here is an important task for you as a Procurement leader to lead by example and achieve “BCP” at the top level of the organisation. A key element for the leader is to ensure the budget to get the organisation needed.

 

Step 4 “Suppliermanagement” concerns the opportunities and threats from the suppliermarket. This is the specific competence of Procurement to contribute to the determination of strategy of the organisation. The operational/tactical procurement organization is in place, the staffing meets the need for competences to develop towards a strategic level and you know the market of your organisation and it’s position in the market. Suppliermanagement is the fuel for the impact of Procurement on the business. How is your relation with the suppliermarket, what is the strategy of your strategic suppliers, what about supplier market developments, in short what are the opportunities and threats? Important parameter is the time you spend on the supplier market in relation to your attention to your own organisation. Now you have a story that needs to be told to the organization that helps determine the strategy of the organization. The more dynamics in the supply chain, the bigger the impact of suppliers on your organization and the more important the “BCP” still stands

 

Step 5 “Position” deals with the position of Procurement in the organization. To what extend does the organization listen? Next to behaviour is position a basic condition to realize impact on the business. It’s important that Procurement will be judged on topline and bottomline results of the organisation and takes responisibilty for this. The Procurement policy is 100% in line with the strategy of the business and must be  formulated the same way. The same terms and the same priorities. “Costs” become “margin” and sustainability is important when it’s important for the organization. Procurement and the business are all pulling together and cooperate closely to realise the business goals. Procurement is prominently represented in cross functional projectteams. As a Procurement leader it is necessary to connect with the board and be seen as a business partner. You are consulted because of your strategic, financial and commercial insight and you participate in the decision making process regarding make or buy, proposition towards the market, corporate riskmanagement plans, product development and merge and acquisition. In short Procurement take their role in strategy development and excecution by the organization.