How Procurement Professionals Can Add Value to Business Performance: Some Further Thoughts

Gerard Chick, chief knowledge officer, Optimum Procurement Group has produced a series of articles looking at a number of key areas where procurement professionals can add value to business performance.  He wrote about: Shared Concern Around Risk, Sustainability and Diversity, and Aligning with Customer Demand

We had some good insight in response to these posts, so we thought it would be interesting to share that with you and the response from Gerard Chick which generates some further thoughts on the topic.

Omar Khan, of Procurement Solutions Group, shared this with readers:

"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 and 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 and 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 and henceforth unknown status of strategic partner from the C-suite." 

We thought Gerard's response was worthy of publication, as it adds deeper insight:

"Hi Omar, thanks for your comment. I think that the big question is with the shifts in the ways that business is done are we are witnessing the dawn of a big shift in the way strategic procurement is done? Category management has been the only credible procurement strategy for around fifteen years and that may be about to change. The techniques devised in category management strategies to choose suppliers and build strategic partnerships are due for an overhaul.

Today procurement professionals are under considerable pressure to deliver value-adding business performance; it is no longer enough to build a supply management capability that is efficient, demand-driven or even transparent. Procurement must offer the organisation something that is value-adding: a new supply management where the strategic scope of procurement’s value is delivered via innovation, a networked function and focus.

Procurement must be the function that is continually challenging ways of working. Looking to ensure it helps its internal business stakeholders achieve their goals and targets whilst, at the same time, taking the opportunity to challenge total cost, facilitate customer of choice benefits such as access to innovation and of course the management of risk. Most critical of all is that procurement must be aligned to the corporate focus addressing the key question for any business: “what is value to the customer?”

The customer never buys a product. By definition the customer buys the satisfaction of a want, which in economics is defined as value. In essence value is utility i.e. the total satisfaction derived from a good or service.  As we know the utility one derives from a good or service is difficult to measure; but we can determine it indirectly with customer behaviour theories, which assume that consumers will always strive to maximise their utility."

We are delighted when our posts generate lots of thought-leadership response: please keep commenting, it enriches our knowledge base.

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