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Empower Procurement For success. Photo by Photo by Joey Kyber:

Empowering Procurement is the Missing Link to Business Success

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Recent world events and consequential inflation left procurement scrambling to maintain their supply chains and mitigate costs. Now, research is pointing to how it’s procurement’s time to be part of the long-term business strategy. Support the procurement team and you could see sustainability targets met, more trust between departments, and an alignment of your company’s mission.

In this article, we’ll lay out 3 challenges the role of procurement face, and 3 ways in which, by overcoming these, the department can help you achieve business longevity.


The Challenges of Procurement

1) Perception of the role

Once called “buying”, “purchasing”, “strategic sourcing” or “supply chain management”, the role of procurement has evolved and become more complex through the years. To this day though, it is still misunderstood and underestimated. According to a report by Efficio, an alarming 49% of Chief Procurement Officers believe they don’t have buy-in from the Board. Even on LinkedIn you see posts from Procurement professionals describing conversations of complete misunderstandings of what procurement involves:

“You just phone suppliers and arrange deliveries”


Failing to see the strategic value to a procurement team could just be what is holding them back from delivering business-boosting results like growth in profitability.

2) Multiple pain points

Just-in-time manufacturing, quality control, inaccurate quotes, rising costs, inefficient communication. And these are just some of the top procurement pain points laid out by Fast Radius. That’s not to mention added stresses from global supply chain issues due to the pandemic and the war in Ukraine.

Cornell University recently found that people make an average of 35,000 decisions every day. With all these pain points, I’d say procurement professionals make double that.

Communicating the length and breadth of the procurement role to everyone in an organisation will help educate that there is more to the decision-making process than the lowest price. This will in turn increase trust between departments.

3) Lack of alignment with overall business goals

In an article by Una, they discussed where procurement belongs in the hierarchy of an organisation. The goals for CEOs, CFOs, and COOs will be different, and so, if a Procurement team is more aligned to one of these over the other, then their main focus and decision-making process will be different. Typically, for example, a CFO will be more concerned with the bottom line than a strong supply chain; whereas a COO will be the reverse.

Of course, this only applies if your company structure doesn’t involve a CPO, in which case they have a seat at the table. Either way, the priority for everyone at the board level should be long-term wins and therefore longevity of the business.


The 3 Ways to Complete the Missing Link

All 3 of the challenges above highlight where the opportunity lies to empower procurement. From these we can extrapolate the following with longevity in mind:

1) ESG Goals

Efficio, through their report ‘Bridging the Gap’, has identified procurement as paramount in the success of businesses achieving their ESG goals. Businesses look to the 3 scopes of carbon emissions to help measure these and decarbonise at each stage. Scope 3, which is reportedly responsible for most of a business’ emissions, is set firmly in procurement’s territory.

This report has reinforced our belief that Procurement, alongside board-level commitment, is the key determiner for organisations to successfully achieve their ESG objectives.

~Efficio, Bridging the Gap: Procurement’s vital role in making ESG strategy a reality

ESG strategy really goes hand-in-hand with the concept of sustainable economics. For too long shorter-term savings outshone longer-term wins but now businesses are stepping up. It’s clear that what is good for the planet now is actually good for business.


2) Cost vs Price

Cost vs Price continues on nicely from ESG goals as the skill of seeing the true value in something, like you need for ESG, can be applied to other business strategy.

Kieren Curry, in the video below, gives a good example of the importance of recognising the difference between cost and price. The Hotpoint procurement mistake is extreme, however it calls attention to how bringing procurement into the wider picture is vital.

“That understanding of cost vs price. They’re two very different things.”

~Kieren Curry, Interim Procurement Director (at time of filming)

3) Building a Sustainable Supply Chain

Whether laws are approaching or not, businesses that focus on reducing their carbon footprint throughout the supply chain will prosper. Unfortunately, according to Inverto, only half of businesses consider the carbon footprint of their suppliers, and 39% do not have a procurement sustainable strategy. This is understandable given the problems procurement has been facing in the last few years. Now is the time though to turn that around and prepare your supply chain for the future.

Again, this is where support needs to come in. Procurement will need to explore new technology and tools to help measure improvements along the supply chain. They will need to devote more time to working with their suppliers, or finding new ones, to align the goals of the company with the emissions of the suppliers.


The Takeaway

If you haven’t empowered your procurement team to start working on the long-term goals of the business as a whole, then now is the time to do it. Focus some of these long-term goals on ESG strategy and you will start to see the real impact of a strong procurement team.

Many say that procurement is ‘People, Process and Paperwork’.

Maybe it’s time to change that adage to ‘People, Process and Planet’.


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