Procurement functions proclaim their value in “millions of dollars saved,” but it’s no secret that such savings are often questioned by internal critics who counter that actual savings were less than advertised, or came at the expense of quality.
There’s no doubt that a good procurement team can generate genuine savings throughout the enterprise without sacrificing quality. The self-evident value of such efforts, however, should not be taken for granted.
A new Protiviti white paper, The Dollars and Sense of Procurement’s Real Value, explores best practices in procurement brand building. I want to highlight a couple of points from that paper.
First and foremost: Show your work. You can be the best negotiator in the world, but that’s not going to build your brand unless you and your internal customers can agree on what’s required in terms of procured goods and services and what constitutes a successful outcome.
Procurement should be knowledgeable about, and formally aligned with, the business stakeholders it supports. By working collaboratively with business partners, procurement can establish a consistent, enterprisewide view of spending and value among the stakeholders. Accurate measurements of cost reduction and the value that procurement delivers are crucial to providing your stakeholders transparency into your effectiveness.
Metrics should be agreed to upfront, in a project charter – a formal document delineating goals and desired outcomes. Value claims should be documented, auditable and aligned with a budget – a process that should include operational stakeholders, procurement and finance.
Additionally, treat suppliers as partners. Few leading procurement functions these days view their primary role as hammering suppliers on cost. While costs must be managed to generate the greatest value to the organization, top procurement functions work with suppliers to find solutions that create sustainable value on both sides of the transaction.
For example, suppliers will often offer a discount to buyers who promise to pay in ten days or less. Such trade terms can offer substantial savings over the outdated strategy of stretching out payments to earn more interest on the float, especially in today’s low interest-rate environment.
By now, you should be seeing a pattern. Relationship-building, accountability and collaboration are the hallmarks of a procurement powerhouse. By taking the time to cultivate relationships – both inside the company and with suppliers, getting straight on stakeholder expectations and success metrics, and documenting actual savings and savings, as well as cost avoidance, you’ll see your the value of your procurement brand soar.
Do you have a procurement success story? I’d love to hear about it. Feel free to reach out or share it in the comment section below.