There is no doubt that procurement organizations deliver value, through strategic sourcing, category management and other means. What distinguishes procurement organizations perceived as top performers from the rest is how well they quantify the value they deliver to the company.
Recently, I had the opportunity to moderate a panel discussion about the challenges of demonstrating procurement’s real value to the rest of the organization. I was joined by Kathi Cox, Senior Director of System Integration and Innovation with Texas Health Resources; Richard Waugh, Vice President, Corporate Development with Zycus; and Rene Urbina, Vice President, Finance Shared Services with Curtiss-Wright. Below, I want to share some of the key takeaways from our discussion that attendees found helpful.
Develop governance structure upfront
By creating a governance structure early on, procurement organizations can obtain buy-in from the main players by having them at the planning table rather than trying to gain their support after the fact. Procurement, finance and business unit stakeholders should form a cross-functional team and collaborate to create a cohesive procurement process that leverages the right tools and expertise. By developing the governance structure in this manner, procurement can demonstrate its real value upfront, rather than having to prove it later.
Use the right tools
Once the organization has designed and implemented an effective savings methodology, it’s important to solidify and retain the benefits of the deployed solution. There are procurement technology solutions that support end-to-end, source-to-pay functionality, including capabilities that support the management of an effective savings methodology. The right technology can demonstrate procurement’s value by increasing visibility (though automated access) and allowing everybody involved to be on the same page.
Have ongoing tracking and reporting
While transparency and collaboration throughout the procurement process are both extremely important, tracking and reporting are most critical to its continuing success. If the benefits generated by procurement, or even a particular sourcing event, are not tracked and documented on an ongoing basis, questions will be raised, such as:
- Were the estimated savings ever realized?
- Why is my budget being reduced, when the reductions in cost are not visible to me?
- And ultimately, why do I need to work with procurement on this?
The discussion doesn’t end here. In addition to the takeways above, during the webinar both Kathi Cox and Rene Urbina shared their first-hand experiences with developing a savings methodology and a governance structure, and how that helped realize benefits for their respective companies. You can access the free recorded version here. For even more insights, download our white paper, The Dollars and Sense of Procurement’s Real Value.