How Procurement Professionals can add value to business performance: aligning with customer demand

In this third in a series of articles looking at how procurement professionals can add value to business performance, Gerard Chick, chief knowledge officer, Optimum Procurement Group examines a number of key areas where procurement professionals can make a difference. In this post, he looks at how to align with customer demand.

Aligning with customer demand remains an important supply management challenge and it is important that procurement professionals develop a customer-centric mindset. It is increasingly important for procurement to be involved in delivering what the customer wants and what an organisation needs from its suppliers to deliver it. Direct engagement with large business to business customers is a key part of procurement’s role.

However, in discussions with procurement professionals we heard that despite the obvious need for customer interaction, many are pushed to focus more on their suppliers rather than their customers. Even in supply-chain planning with all the demand-driven hype, it’s not always easy to include input from customers.

And yet, because customer interaction seems costly and time-consuming, many businesses it seems feel that the cost of this engagement can outweigh the benefits. Moreover as the pressure to be more profitable grows, businesses won’t be able to afford the excess inventory, lost sales and missed innovation opportunities caused by inadequate customer collaboration.

Essentially, managing value helps deliver profitable growth. For example, innovation is focused on products and services that provide value to your customer. Procurement is expected to deliver innovation often from the supply base and this is reflected in the end product or service.

Any innovation that does not provide additional value relative to the best alternatives is in essence money wasted.

Most organisations will excel at meeting customer needs once they are known. It’s the ‘knowing’ part that is difficult. Some supply chains connect with customers primarily to provide timely, accurate delivery. Yet organisations should get smart and interact with customers throughout the product lifecycle. In effect, any interaction with your customers should become an opportunity for inherent customer collaboration.

Smart procurement professionals should use their judgement and business intelligence to rise above and beyond the noise. Through advanced analytics, they can identify ever-finer customer segments and support the organisation to tailor their offerings accordingly.

Key points to consider when checking how aligned your business is with your customer’s needs include:

  • Are your customer relationships as well managed as your supplier relationships?
  • In which parts of your supply chain do you engage with your customers?
  • Is your performance measurement system focused on your customers?

 

 

First Voice

  1. Omar Khan:

    Aligning with customer demand is indeed a great opportunity for procurement professionals to expand their traditional role and shine as strategic partners. This can be done very easily by collaborating with company’s sales and field service teams. Years ago, a major global retailer; a key customer of the OEM Company where I was procurement manager would wait till the last minute before placing the PO for a customized product “always urgently required” for their new store opening in the US or abroad. These were often large quantity orders and would result in major expediting efforts with our suppliers and production over time at the factory. We finally resolved the situation by getting preliminary information in advance on the customer’s new store opening schedules by working with Sales & field service teams. We would then procure all standard components, assemble the product half way or more, leaving the customization till the PO was placed. Customized product would be integrated & ready for shipment in record lead time. This strategy resulted in amazing level of customer satisfaction and elimination of huge sums of expediting and overtime charges. Above all, procurement team earned a new & henceforth unknown status of strategic partner from the C-suite.

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