Transforming the Perception of Procurement in your Organization
While the strategic vision of an organization is usually consistent across departments, each function’s strategies to achieve that vision do not always align. Just as legal and HR are there to ensure that all actions and hires are made in the best interest of the organization and its people, procurement exists to ensure that all purchasing decisions are made in the best interest of the organization.
As a strategic sourcing consultant, one of the biggest challenges I face on a daily basis is convincing the stakeholders in a particular category that we are not there to be an unnecessary roadblock to them securing goods and services. As more and more companies are transforming the way they purchase, it is critical that internal perception of procurement shifts for the better. It is time for procurement to become its own PR department.
Below are some common perceptions of procurement and the truths we need to communicate to unite everyone in pursuit of overall organizational goals.
The Perception: Procurement is a necessary evil that delays the purchase of goods and services
The Spin: Procurement is a help desk function, similar to IT
The most common reason stakeholders avoid working with procurement is because they want to avoid a long, drawn out sourcing process that requires them to do a lot of heavy lifting. Procurement provides purchasing expertise to support the decision making process in any scenario. Stakeholders should feel comfortable reaching out for ad-hoc advice on supplier searches, negotiation tactics, service level agreement development, and supplier management. If stakeholders are able to tailor the level of involvement that procurement has, they are more likely to reach out and ask for advice and support. This is a win/win for the organization as the stakeholders are less constricted and decisions are made in line with a strategic procurement mindset.
The Perception: Procurement only goes after lowest cost and does not know enough about the product or service to identify quality
The Spin: Procurement is a stakeholder liaison with expertise in negotiation and relationship building. All final decisions are based on collaboration with and acceptance from the stakeholder team.
Procurement should not be positioned as an absolute expert in all areas of operation or categories of spend. Engineering and quality departments often distrust procurement as they seem to exist just to cut costs. Procurement should emphasize their expertise in building mutually beneficial supplier relationships and best-in-class contracts. While the sourcing process does (and must) evaluate cost, it also looks at qualitative aspects of supplier capabilities and aims to align those with stakeholder needs. Quality and competitive pricing can coexist.
The Perception: Procurement still runs lengthy RFPs when I already know which vendor I want
The Spin: Procurement can ensure best in class pricing with any vendor, and can assist in building a business case to warrant an award or a switch
There are plenty of justifications for switching and selecting suppliers that go beyond price, from increased service levels to superior reporting capabilities and product mix. Procurement is actually focused on the total cost of ownership within each category. When a stakeholder receives a proposal from a prospective supplier and does not engage procurement, the result may be an increase in cost beyond the unit price of the product. By bringing procurement into the conversation, they can evaluate soft cost savings and value adds outside of price, and assist in building a business case to justify the transition. If the total cost of ownership is above market, procurement can take the lead in negotiating better pricing, leading to a win for the stakeholder and the organization’s bottom line.
The Perception: Engaging procurement will only hurt my future budget allocation
The Spin: Procurement exists to stretch your budget dollars
The final perception needs to be tackled by procurement, stakeholders, the finance team, and enterprise leadership. Reducing costs should allow for the creation of emergency funds to be used throughout the year, and reinvested back into the department. Procurement should be engaged in the annual budget planning process and optimize all spending.
The key to addressing all of these perceptions is exposure, consistency and familiarity. Procurement needs to be proactive in establishing their value proposition and communicating it to other departments. Once traction is gained, success stories should be communicated via newsletters and case studies to further drive engagement and reinforce improved perceptions. Alignment across all teams is critical to organizational success, and procurement can play a huge role in increasing the bottom line.