The Most Powerful Word in Procurement (Part 1)

We listened to a very good presentation from Wax Digital, a leading UK eProcurement provider, at eWorld recently. Daniel Ball, Business Development Director, gave a speech titled "Integration, Integration, Integration -- Why Good Connections Are Key to Raising Procurement's Profile." Here is the essence : 

What’s the most powerful word in procurement? Value? Savings? Visibility? As you step up to 2016’s challenges many such words probably shape your various strategies and plans. But to me the really important words should be those that describe the actions that must be taken by procurement to achieve these ultimate goals - and at the top of my list is integration.

Let’s examine why integration is such a critical focus for procurement. Our recent CPO Viewpoint study conducted with senior procurement, finance, IT and sales and marketing professionals, showed clear inter-departmental integration concerns. While 44% of procurement respondents cited ‘very close’ relationships with other departments, only 18% of those in other functions agreed. A lack of business integration can stand firmly in the way of procurement achieving its end game; whether that’s partnering more productively with the business, effectively joining up processes or creating clear visibility across the sourcing and purchasing cycle. Procurement integration challenges come in three forms - business integration, systems integration and software integration.

Business integration

Procurement’s dealings with internal colleagues are as critical as their external relationships with suppliers. Great work in sourcing suppliers will be wasted if internal customers are not on board. As our research showed, procurement professionals think they have close internal relationships but their counterparts disagree.

As the link between suppliers and business ‘buyers’, procurement needs to operate within a triumvirate, yet there are often imbalances. For example, when business users (other departments) have close direct relationships with suppliers, procurement is a weak link, demoted to merely administrative duties. Equally, when procurement and supplier relationships are very strong and centralised, relationships between end users and suppliers can be overly controlled, reducing the business’ cooperation with procurement.

Procurement also struggles to integrate with the business when it doesn’t communicate its vision and benefits clearly. Traditionally quite introspective as a department, the rationales behind procurement’s actions often get lost in translation and clear procurement leadership is not conveyed.

Leadership expert Simon Sinek outlines an interesting theory in his TED Talk – How great leaders inspire action. People in organisations generally know what they do. Many know how they do it. But few know why they’re doing it. This illustrates businesses failing to lead their people because they centre communication on the task rather than the vision. Procurement is not unique, but its failure to share reasons behind actions needs to be turned on its head as a behaviour. Adopting strong leadership communication with sponsors and internal customers will lead to better integration.

Business issues aside, technology is the other critical area where procurement can have integration challenges. This relates to two areas – how well integrated procurement’s own software is, and how well integrated it is with other business systems.

Tomorrow we will take a look at those. 

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