3 Ways For Procurement to Prove Its Value (Other Than Cost Savings!)

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Spend Matters welcomes this guest post from Dustin Cochran, director of member development at Corporate United.

There’s been a lot of conversation lately in the industry regarding procurement’s alignment with the broader company strategy. As someone who has been in procurement for the majority of my career — with roles ranging from category management to sourcing to my current position as director of member development for a group purchasing organization (GPO) — I’ve lived and breathed the struggles of the industry.

I’ve managed relationships and accounts that were valued at more than $13 billion in revenue to the organization and fine-tuned my negotiation and supplier management skills. In my current role with a GPO, I’m focused more on helping procurement and finance leaders achieve significant cost savings and organizational value.

This is the question that I am often asked: “How can procurement align with the company’s broader strategy to drive greater value and increase influence?” I may be in the minority for this opinion, but I don’t think this requires wholesale change.

Most organizations are focused on three strategic pillars: increasing revenue, operational efficiency and retaining talent. I would say that procurement is already aligned to these pillars. Where they tend to be less aligned is with the strategy of internal departments. However, what I think that procurement professionals should focus on is better promoting how they align with these areas.

Revenue Generation

We typically think of sales teams with this pillar, but should procurement have a seat at the table? There are many ways that procurement teams support the sales teams and revenue generation by negotiating great rates on what sales teams need to be successful in their roles. For example, by negotiating the best programs for travel services, such as car rental and travel management, procurement can help ensure that sales representatives can get to their meetings without issue, while saving the company money on travel expenses.

Not only can their expert negotiation skills and eye for the venues offering the best value be useful the next time the company is planning a sales event, the procurement team can help ensure, via the contract, that risk is mitigated so that the event goes off without issue.

Operational Efficiency

This is likely the area where procurement is seen as best aligned. Continuing to be a steward of cost effectiveness, risk mitigation and lean methodologies is essential. Most business units would love to utilize these skill sets, but many don’t think of procurement when the need arises.

There are two main ways to solve this. First is a wide-scale marketing effort to promote the procurement department to the company. A quarterly email “selling” their services and sharing a few internal testimonials can remind everyone of procurement’s capabilities. The second method of internally promoting procurement’s expertise in this area is simply for procurement to make friends in other departments and be good listeners. Few people would turn down help from procurement if their skill sets align well with the challenge.

Retaining Top Talent

Procurement can aid in retaining top talent by ensuring that the company is using best-in-class suppliers for employee experience. Whether it’s the relocation provider when the employee first joins, the benefits employees receive, or the staffing companies that help managers fill openings on their team, having a strategic agreement with top suppliers will go a long way when it comes to attracting and retaining talent.

It’s fortunate that over the last couple of years, the conversation about the “value” that procurement brings has evolved to focus on more than traditional cost savings. Especially as categories have been competitively sourced a handful of times, procurement teams must seek other ways to deliver value to the business. Positioning procurement internally as more of a business partner role and promoting its impact in these three strategic areas is a good place to start.

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Voices (2)

  1. Steve Ighorimoto:

    Excellent post by Dustin. Thanks for sharing. Procurement professionals must at all times focus on pipeline of value and cross functional collaboration they bring on board in their organizations. For instance,reducing lead time in procurement cycle add value in manufacturing efficiency but more importantly will help in fast tracking new products or package launches . In FMCG industry, where I operate; this type of collaboration from procurement function help address consumer taste changes by fast tracking and expanding products offerings, improve execution excellence and revenue generation.

  2. Alex Tardecilla:

    While employed at a major Houston-based E&P in 2009, I collaborated with the drilling manager and a couple of his engineers to look at reducing the costs for mobilizing and demobilizing its contract drilling rigs. On analysis of the invoices, we took note of the dates and locations for each rig, then mapped them. Voila, we noted a pattern of rigs going from one end of the lease to another, without organization. We also identified the lack of coordination between the drilling managers, coordinators and the drilling rig contractor. We worked to optimize the scheduling, planning and booking of the rigs – and delivered approximately $2M in mob/demob costs.

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