Today, suppliers have responsibility for a large and increasing portion of enterprise operations (not to mention receive an increasing percentage of revenues). As a result, the team managing them has a significant opportunity to impact the top line, as well as avert disruptions, protect the corporate brand, and introduce innovation.
Not all procurement organizations have acted upon these opportunities, for a variety of reasons. Sometimes we are distanced from the top line by other internal teams with greater responsibility for it, such as operations, marketing and sales. Other times we assume that the only way to impact the top line is through ‘direct spend,’ or the products and services that are associated with creating our company’s core offering to customers. Although not impossible, driving innovation from our seats in procurement may seem like a foreign and a faraway target.
Fortunately, all procurement organizations – even those that do not have their own representative in the C-suite – can introduce innovation at the enterprise level. It may just not follow our usual pattern of making procurement contributions through a deliberate strategic sourcing process.
Traditionally, procurement has been more of a science than an art. Our work is data-driven, our results are measurable, and our processes are disciplined.
Perhaps this is why we tend to struggle when we are called upon to lead a procurement transformation initiative. In order to transform ourselves, our team, and our objectives, we must create something different enough from our starting point to be considered new. In fact, procurement transformation might as well be called ‘procurement innovation’ for the level of creativity it requires.
Creation is, after all, an art. Creators respond to their circumstances in an immediate way. As a result, from time to time artists must re-invent themselves to remain aligned with (or even ahead of) the trends in the world around them.
Procurement innovation requires those in leadership positions to get in touch with their creative side, starting with some careful self-examination.
Category management requires a higher-level perspective on enterprise priorities and procurement activities than other approaches to spend management. Gaining an elevated perspective is not just about rising above the minutiae of sourcing, spend analysis, and supplier management; it also requires a broader point of view on spend and enterprise objectives. As a result, category management does not happen without a solid plan—one that must be developed in anticipation of the processes and activities that will be carried out with its guidance.
We might even make the assertion that category management planning is where strategic procurement begins. A well-crafted category plan brings together demand estimates, savings targets, supplier relationships, and regulatory/market dynamics so they can be examined and understood collectively. Rather than initiating an effort based on a single business need, expiring contract, or incumbent supplier relationship, category management considers the totality of what the company buys against the backdrop of the markets they buy from.