On a global level, procurement organizations are evolving with the ever-changing world to continue to deliver value to their business. Today, the goals of procurement departments go well beyond simple monetary advantages, despite facing numerous thresholds such as: supply market volatility, supply chain disruptions, rising costs of raw materials, and talent shortages. These challenges are only increasing in volume and strength, forcing procurement organizations to continue to transform and help power their business through the setbacks.
According to a study by My Purchasing Center, research put out by consulting, technology service, and outsourcing giant, Accenture, procurement leaders are changing their strategies. The study says these forerunners are “transforming procurement from a cost-focused function to one that adds new levels of value, reflecting the mastery they have achieved across six measures.” The study focused on mastery behavior in strategy, sourcing and category management, supplier relationship management, requisition to pay processes, technology enablement, and workforce and organizations.
In the study mentioned above, two types of procurement organizations were established: masters and contenders. In this article we will focus on what makes procurement ‘masters’ and what are they doing differently to set themselves ahead of the majority.
The main difference that sets masters apart from contenders is their approach to procurement. Procurement masters are constantly looking for ways to improve their company’s results, using strategies to push their organizations ahead of other organizations. Think of procurement masters as a team on the offense, moving forward. These strategies bring long-term value to their organizations. According to the study, these organizations will also enjoy “greater certainty over demand management, lead times, product costs and resource commitments for sourcing.”
With every offense, comes a defense, and in this situation the team operating with defensive strategies is procurement contenders. Contenders operate their procurement departments by responding to the changing needs of the enterprise. Contenders are defending their organizations against changes in the market to hold costs down. These organizations are still obviously working to be as efficient as possible, but are not quite at the level of procurement success as masters.
Quite simply, procurement masters do things differently than other organizations, and mediocre procurement departments should study their practices and use them to improve their own procurement practices. The study mentions that procurement masters “look to integrate procurement with overall business strategy, and the strategies of core functions such as finance, operations or engineering.” Tying procurement to your overall business strategy will allow procurement to have an influence on your entire organization, which will allow you to cut costs on all areas of the playing field. According to the study, “ 90 percent of the masters’ procurement organizations provide innovative value beyond cost savings, while only 32 percent of contenders use procurement as a game changer.”
Not only do masters intertwine procurement with their entire organization, but they also seek to effectively integrate with their supply networks. These companies are perfectly aware of the value their choice suppliers bring to the organization and use these strong supplier rapports to set themselves apart from contenders. Doing this allows masters to improve sourcing and push for better demand management beyond volume discounts.
Being a procurement master is undoubtedly something your business should thrive to be and since there is no such thing as perfect, setting high goals for your procurement department will lead your organization to success.
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