Spend Matters welcomes this guest article by Sanyam Khurana of GEP.
We have all heard that famous proverb, but when seen in the context of procurement, my slightly tweaked version still holds true. Classic examples are when hard times hit – a war, a depression or recession, crisis or just a tough period due to wrong decisions – it is the mighty who succeed with their hard work and perseverance. In my experience, procurement is perhaps a function that is seldom heard diligently or given a seat in the executive board. More often than not it is directed to do something, and like a sincere employee, it listens, executes and performs.
However, a new leap of faith is born when procurement takes a step further, pre-empting the need to provide intangible value. There are times when the business folks miss out on the fine print or cannot do a due diligence on supply market. Procurement must embody that role to caution on risk or a recent development that may impact the business environment. Among other intangibles, here is how I believe the new age procurement professional compliments the business:
- Fine print analysis: Reading through the fine print is messy and time consuming. Negotiating it is a bigger Herculean task. It is easy to miss out on the finer details, like commercial terms on minimum commitments, volume rebates, payment discounts or risk mitigation clauses that tie into the overall picture, thus not making the deal be a win-win for both parties.
- Bottom line enrichment: Year-on-year savings reduction is the most common form of tracking savings. It also gives the accurate picture on what money that was going to be spent from budget is saved – possibly channelized into something more meaningful. The savings results in cash flow, which is then churned back into the bottom line. A heavier bottom line is always a delight to shareholders. When bottom line needs to be enriched, procurement can help save the day by bringing in cleaner savings from purchase of goods and services and helping the C-level folks avoid job cuts impacting the productivity and brand of the firm in marketplace.
- Strategic change for newer times: Since procurement is the first level to interact with suppliers, it is also the first to learn about best practices in the market through variety of benchmarks, webinars and conferences. Learning about new initiatives from suppliers and industry trends is a part of the job for a buyer, which he or she can adopt in his or her work life. Restructuring the pricing model or enhancing the value of goods and services to suit the changing needs adds significant upward value to the business – helping achieve a greater good.
- Supplier relationship enhancement: From the multiple RFPs that go around in the market, every client when scouting for the right supplier seeks to find a right “partner.” It is indeed a lawful marriage when the business is looking for a strategic partner. Like marriage is a 2-way road, so are supplier relationships. Both sides need to work equally hard in making the marriage work. The client should provide the scope while the supplier exceeds the deliverable. Procurement in this case is the facilitator – one that tied the bond – without which operationally the marriage may not succeed.
- Compliance to the “right” rules: It is often noted that rouge spending or non-compliance to the rules is an issue that many clients face. Be it in spot buying, off contract purchases, one time requirements and non-adherence to systems in place. It can be procurement’s imperative to drive the compliance rules – of putting checks and balances in place, watching the spend like a hawk and driving the compliance on spend and spending attitude for the business based on strategic initiatives and partnerships. This would lead to tangible savings leading to the benefit of the firm at large.
Indeed, procurement may not be the strongest business unit on the forefront, but it does come to the rescue in battling tough times by providing the strategy, guidance and support to win over the tough times.