By Peter Smith, Managing Director at Procurement Excellence Ltd. and former Managing Editor at Spend Matters UK/Europe
In my last article
, I looked at some of the factors you need to consider when you’re developing a procurement strategy and plan, making the point that not every Procurement team can or should aim to be “world class” in everything they do.
I will now focus on what should go into your procurement strategy, change programme or annual plan. What are you actually
going to do? Getting that right is vital of course, because if you do the “wrong” things, even if you do them well, you won’t be thanked by your organisation (or your boss). But what do I mean by the “wrong” things? Well, for instance, focusing on issues or activities that the business (or your public sector organisation) doesn’t really value. That’s a problem I have often seen over the years – procurement functions working hard, doing good work, but not getting recognition because they’re operating in areas that frankly nobody at board level really cares about.
So that means getting your strategic alignment right, understanding what drives the organisation and makes it tick, then ensuring your procurement strategies relate closely to that. In recent years, we’ve certainly seen more Procurement leaders talking a good game on alignment, but I’d argue the real-life delivery hasn’t lived up to the hype in many cases!
Private sector organisations seek “competitive advantage”, which is a fundamental concept that everyone should understand. They look to out-perform their competition in order to thrive. The public sector is a little different – here we have “optimal delivery of policy goals” as the equivalent, to some extent. But, in the private sector, some organisations seek that advantage through cost leadership. Others will look to innovation, or product differentiation, or other key factors, as their source of advantage.
Clearly, the priorities for procurement should reflect this. In an organisation that depends on cost leadership, the traditional procurement thinking around cost savings will quite correctly be central. But if our organisation looks primarily to innovation or other more complex factors, then procurement must get on board with a different agenda.
Let's now look into the key enablers, because it’s clear that whichever of the eight you are going to focus on, (probably more than one of course), then there are certain basic underpinning essentials that are always important. Having a clear strategy is no good if you don’t have the following in place:
A clear set of processes / target operating model
– it is vital to have a clear picture of how you want procurement to work, both the strategic sourcing / category management element and the transactional aspect of the work.
– I don’t agree with those who say you can’t do anything
without good data; but without it, you certainly can’t get close to what most Procurement professionals would want to achieve. Whether you are going to support cost reduction, innovation, operational efficiency or whatever, you do need to understand your spend, your suppliers, your contracts…
Tools and technology
– it’s just not feasible these days to perform at even an adequate level in procurement without decent tools and technology. It doesn’t have to be absolutely leading edge, but you and your internal stakeholders also have a certain expectation based on what we all see today in our daily lives in terms of tech. Whether it is transactional or sourcing systems, spend analysis, contract management – we’ve really got to have something decent in place!
– but people still matter. I hear a lot about the talent shortage in procurement, which strikes me as a bit of a failure by our professional leaders over the last decade or so. There are proven approaches to recruitment, training and development, and retention that good organisations have used for many years. Simply moaning that you can’t recruit brilliant, experienced category managers for £30K a year doesn’t help anyone.
I’ll finish on that somewhat controversial note, and I promise I’ll get into those issues further, as well as the eight procurement value options, at the Proactis event. Until then, if you aren’t sure what your organisation’s drivers of competitive advantage (or policy goals) really are, I suggest you might want to find out before you go much further.