Spend Matters Paper – Putting the Supplier at the Heart of Procurement Thinking

So here’s a plan - through August we’re going to highlight all the research papers, briefings and so on that we’ve produced in the last two and a half years. We’ll  include what we said when we first launched it, and of course the link so you can download – free on registration. Why not use the quiet time in August to brush up on some procurement thinking? And they haven’t dated, in our opinion.

Today we have “Putting the Supplier at the Heart of Procurement Thinking” sponsored by Zycus. Here’s what we said when we launched it just a few months ago.

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In the paper, we argue that supplier management is taking centre stage in progressive organisations for good reason, and that maybe the category management star is fading – a little at least. Here’s a taster to whet your appetite – but do read the whole paper. You can download it (free on registration) here.  

 “Ask a few questions in a typical business. How quickly can they access key information about their suppliers? How many contracts does the supplier hold across their organisation, and what is their value? What are the goals and objectives of the key suppliers? How are they performing against the requirements that the buyer sets them? Even for the most important and largest suppliers, it is surprisingly unusual to find a procurement leader who can answer these questions convincingly. (If you can.. . well done!)

So why might things be changing now?  One factor is the increased sophistication of buyers as they switch from a focus on price to a focus on total value. That requires better understanding of the supplier, and of what they can do for the buying organisation to deliver that value. Clearly, that can be much more than simply a lower price.

More supplier focus may also be a positive sign that procurement is becoming better aligned to the business needs of internal stakeholders. Given that the business and the leaders within it tend to think about their key suppliers (after all, these suppliers are agents who can affect their own personal success), rather than the more nebulous “categories”, then procurement can demonstrate alignment through a similar focus.  Greater awareness of supplier and supply chain risk is another factor which has driven this emphasis  – more on this topic  later.

So suppliers are moving centre stage, no longer seen as purely there to “keep  the business running”. There has been a period where cost reduction was without a doubt the main driver for many organisations. But now, leading companies are looking at how to obtain true value from suppliers and supply markets. For many, this means suppliers are expected to contribute to growing business value and competitive advantage. That may come from supplier innovation, cost leadership, or time to market benefits  – and therefore procurement has to reflect those priorities.

This doesn’t mean category management is dead – there will always be a need to look at spend areas in their entirety. But it is suppliers – not “categories” – that deliver real strategic benefits. To achieve those benefits, procurement needs to have a stronger focus on understanding, selecting and managing the supplier”.

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