Contribute to growth and shareholder value – 2014 priorities for procurement leaders (part 1)

Between Christmas and New Year, we listed some of the topics that will be driving our coverage and writing during 2014. But what do we think CPOs and other senior procurement practitioners should be focusing on? That’s a difficult question because of course every organisation is different, and you really need to ensure that your priorities align with your wider functional, business unit and organisational strategies, goals and objectives.

But we’ve got five suggestions that are likely to apply in the vast majority of organisations, we suspect and hope.  Here is the first.

1.                   Contribute to growth and shareholder value

The economies in a number of countries picked up faster than expected in 2013, the UK and US amongst them. Whilst the outlook isn’t so good in some other places, France for example, it is likely that many businesses see 2014 as a time for expansion and investment.  That may be in capital equipment, plant or production capacity; through mergers, JVs and acquisitions; in additional marketing and sales effort; in new product development; or through geographic expansion.

So 2013 may mark the end of the economic phase triggered by the banking collapses of 2008. Since then, for many organisations, the focus has been on managing costs carefully, conserving cash and generally acting in a cautious manner. To some extent, that mood plays into the traditional strengths of procurement.  But if organisations are now moving into a different phase, it is vital that procurement functions keep up with that change.

That doesn’t mean disregarding spend management – there will always be a place for that and many spend categories ‘cost out / down’ is the appropriate principle strategy. But think about how procurement can support revenue generation, or expansionary moves. Can you get key suppliers to work with you better on new product ideas or product development that will drive sales?  Are there joint venture opportunities with suppliers, perhaps in new markets or geographies? How can procurement best support merger or acquisition opportunities, both pre and post transaction?

And what about opportunities in supply chain finance and dynamic discounting? That is already shaping up to be one of the most active areas for 2014, with new market entrants and interesting products and tools coming onto the market.

 This is a huge topic obviously and one we’ll come back to many times this year. It also has some significant implications for procurement in terms of everything from how we interact with stakeholders, to skills and capability in the function, and (absolutely critically) how we measure the performance and success of procurement. But for the moment, let’s leave it with three suggestions for practitioners to consider:

1. Make sure you understand your organisations goals and whether there is indeed a change in focus, given the changing economic outlook.

2. Think about where a different procurement approach – in terms of particular spend areas / categories - could help to drive revenue, growth and innovation.

3. Don’t try and do any of this in isolation – it will only be successful where procurement works closely with internal stakeholders.

First Voice

  1. b+t:

    I suggest that the term ‘cost saving’ is binned and replaced by ‘profit enhancement’.

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