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Procurement research excerpt: Procurement's role as a strategic partner

Guy Strafford
Sep 14, 2011 4:19:00 PM

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Guy-New

Some more research tid-bits leading up to the live presentation of the findings and results from our latest Enhancing and Redefining the Role of Indirect Procurement research study.

About the research:


The in-depth study, developed in conjunction with NelsonHall, involved 120 CPOs and CFOs from FTSE 100 organisations across Europe and the US to better understand procurement’s changing role within business today and tomorrow.

Focusing on indirect (or non-core / GNFR) procurement, the in-depth study identified a number of challenges and opportunities for global businesses in realising maximum benefits from indirect expenditure ...read more >>

Research snippet:

Indirect Procurement Functions Need to Enhance Role as Strategic Business Partner

According to the research, seventy per cent (70%) or organizations believe that it is highly important for the indirect procurement function to act as a strategic business partner to business units, but only 46% express a high level of satisfaction with the extent to which this happens in their organizations, and a quarter of organizations state that this doesn'’t apply at all.

Factors that prevent procurement acting as a strategic partner more frequently include:

  • Lack of resources and category expertise
  • Lack of the softer skills sets required. 

One symptom of this lack of acting as a strategic business partner is the tendency of indirect procurement functions to lack involvement with business operating units at an early stage of projects and hence fail to steer the procurement approaches taken within these projects.

44% of organizations express only low or moderate levels of satisfaction with the extent to which the indirect procurement function is involved early on in non-routine projects. A similar level of satisfaction is also exhibited with the advice and guidance given by the indirect procurement function prior to the sourcing function being made.

Finally, over 60% of organizations express only low or moderate levels of satisfaction with the ability of the indirect procurement function to influence attitudes and behavior indicates the extent to which the function is typically acting as a support service, rather than being able to drive best practice across the organization.

Proxima Commentary

Given the potential major contribution to the bottom line from optimizing indirect procurement processes and from increasing the proportion of spend under management, indirect procurement should be working closely with management across the organization.

However, there is currently a significant gap between the perceived importance of the indirect procurement function acting as a true strategic business partner within the organization and the level of satisfaction with current performance in this respect.

The research highlights there is a clear desire at the operating level within organizations to enhance the role of the indirect procurement function to increase its influence and contribution to the wider organization. However, board members may yet need to be persuaded.

Reasons for the low or moderate contribution from the indirect procurement function further up the hierarchy include:

  • A lack of visibility of the indirect procurement function, which is often seen to be '“in the shadow”' of direct procurement, where the quality and timeliness of new product sourcing is clearly critical to business success
  • The relatively low status of indirect procurement, which  is reflected in the fact that in a third of organizations the function reports to an accounting manager, not even the CFO
  • A lack of awareness of its contribution to driving business performance - the indirect procurement function typically covers routinely purchased items, but usually lacks the capacity or the resources to provide full sourcing support for non-routine items,- and some non-routine indirect procurements may be supporting major projects that are of strategic importance to the business

The C-suite perceives the indirect procurement function is valued relatively highly by business operating units and functions, implying a mandate at the business operating unit level to take on the role of strategic business partner, but this value is less recognized at board level.

Here are 5 quick-wins to get you started in pursuit of building board level recognition:

  • Understanding your key stakeholders needs and drivers: What are they trying to achieve? What are their challenges / pressures?
  • Understanding perceptions of yourself / your department: Do you know what other people think of you and your department? Is it positive / negative? How do you truly know you are perceived as a value-adding operation?
  • Aligning goals and objectives: Ensuring you are both aiming for the same target - letting your stakeholders know you are here to help not hinder. Further to this however, is ensuring you have the right depth and breadth of skills, knowledge and expertise around you to effectively manage all category demands and the wide range of stakeholders within your business.
  • Talking in their language: Stop talking procurement and start talking in a language your stakeholders can relate to (example, CFOs are interest in hard savings, risk management, spend control and market conditions - not how your SRM program works).
  • Tailored Metrics and Measurements: Give your key stakeholders the facts and figures they care about and cut out the noise.

 

What are some other tips and techniques you have used / experienced to build board level recognition?

Guy Strafford

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