Procurement Value – It’s Not All About Savings

We’re less than a week away from our webinar in conjunction with Coupa Software,  on Tuesday September 25th, titled "Procurement Delivers Value in Eight Ways – Savings Is Only One of Them"!

In it, we will be looking at how procurement really delivers value to our organisations – indeed, we’re claiming that there are 8 fundamental ways in which we can do that, and we’ll explain them next week.

So, for instance, we often undervalue how much procurement can contribute to internal organisational effectiveness and efficiency (that’s one of the eight, by the way).  Those achievements don’t show up on the basic “savings” register but can be invaluable – so procurement professionals need to understand and be able to articulate how they contribute real value in all these different ways.

But if you just can’t wait until next Tuesday, then we have a new briefing paper out now on the same topic, which you can download here free on registration too. That is called “Procurement Value – It’s Not All About Savings”.

There obviously is some overlap with what we will cover in the webinar, but in the live session we will also hear from John Callan of Coupa about some of the ideas the innovative software firm has to help procurement professionals deliver value. And I’ll also throw in a few more personal stories about delivering value (and maybe a couple about failing to deliver value…) from my career.

So do sign up for next week, and then even if you can’t make the time you will then get a link so you can listen at your leisure. And back to the paper - here is a short excerpt from the Introduction that sets the scene for paper and webinar.

Procurement Value – It’s Not All About Savings

Introduction

It has become a regular occurrence at procurement conferences. The speaker, whether practitioner, industry expert, or even solution provider, says, “procurement is all about providing value to the organisation, not just cost savings”.

Every senior professional, Chief Procurement Officer (CPO) or similar, in the audience will nod their heads earnestly in agreement. Sometimes though the speaker will follow up with a key question.

“How many of you have savings as your primary KPI or performance measure?”

The vast majority of hands will go up at that point, and sometimes there’s a further question: “how many of you have cost savings as the only significant measure for procurement?” That will also elicit a worrying high proportion of positive responses. What does this tell us?

We can assume that most procurement and supply chain professionals today do understand at least conceptually that “savings” is not the only game in town, and that value has to be what matters.  However, that is not translating well enough into performance measures. So, either procurement itself doesn’t understand exactly what value means, or perhaps procurement has a very clear view of “value” but is simply not good at communicating it to key senior stakeholders.  A third possibility is that although everyone is clear about procurement value, it is just difficult to incorporate the concepts into meaningful and practical performance measures.

We suspect in many organisations there are elements of all three issues at play. While it is one thing to understand that “value” is key, it is another to know how various aspects of procurement activity contribute towards it. We also know that procurement has not always been noted for its skills in internal communication and stakeholder management, at either individual or functional level, and some aspects of value are hard to pin down with simple numbers and measures.

So, in this short briefing paper, we will address that issue of defining “procurement value” in particular; if that is not in place, the rest is inconsequential.  Procurement can add significant value in all the areas that most businesses care about, but that needs to be well understood in order to explain to others and position the function within our organisations.

Voices (2)

  1. Molly:

    Approx. 90% of our clients first approach us based on savings as a KPI/ measure. It’s down to us of course to bring the Value too.

  2. Mr Grumpys Sidekick:

    I’m trying to remove savings from my teams objectives. Savings should be a bonus to the additional excellent work procurement can deliver.

    We’ve all seen how dangerous chasing the bottom line can be but appetite to remove savings as an objective is not easy. Guess it’s easier to quantify than contracts failed or contract cost increases…

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