From cost centres to value drivers

We’ll let you into a little secret… procurement teams hold a significant key to enhancing their organisation’s success.

The problem is, that procurement teams often feel like they have to prove their worth to their organisation because they are often seen as a cost centre rather than a value centre. If you ask many sales teams, for example, to describe procurement in one word, we’re sure the words ‘barrier’, ‘difficult’ and an eye roll or two would be the response. This is due to a lack of understanding about the value of procurement teams and their processes, or stems from business units that may be reluctant to give up control of their own spending.

Many of the benefits of procurement, such as cost savings and improved quality, are often seen as intangible and soft savings, while the costs of procurement, such as staffing and technology, are very tangible. Procurement teams often operate in the background and their work is not always visible to the rest of the organisation. This can make it difficult for procurement teams to communicate their value and they often get overlooked as a support function rather than a strategic function. Many procurement teams therefore struggle to get a seat at the table when important decisions are being made. Only too often procurement teams are only engaged to ‘execute’ or ensure its ‘complaint’ after the deal is done, this leaves very little opportunity for the procurement team to add value, shape the deal and drive better outcomes.

Often the KPIs associated with procurement do not accurately reflect their value, such as the number of contracts awarded or the amount of money spent and many are under pressure to reduce costs, which can lead them to make decisions that sacrifice quality or innovation.

Let’s look at how the procurement function adds value to their organisation.

Despite these challenges, procurement teams play a vital role in helping organisations to achieve their goals and objectives. They can encourage and influence a wealth of competitive advantages, such as:

1. Cost savings strategies: Procurement teams play a crucial role in cost optimisation by negotiating better prices with suppliers, consolidating spend, and identifying unnecessary costs. This can potentially save companies substantial amounts annually improving the bottom line and/or making budgets go further.
2. Quality enhancement: By sourcing from high-quality suppliers and effectively managing the supply chain, procurement teams can elevate the quality of products and services, thereby enhancing internal and external customer satisfaction.
3. Risk reduction tactics: Diversifying the supplier base, identifying and mitigating supply chain risks, and ensuring compliance with regulations are ways procurement teams can significantly reduce operational risks for the organisation whilst adding significant value.
4. Fostering innovation: Collaborating with suppliers to innovate, develop new products, and transfer knowledge and technology can drive continuous innovation, keeping their organisation ahead of the competition.
5. Sustainability initiatives: Sourcing from sustainable suppliers and working together to minimise the environmental and social impact of the supply chain aligns with today’s sustainability goals, ensuring that the organisation is as socially responsible as feasible.

How can procurement teams demonstrate their worth?

Not that we believe that procurement should have to prove their worth, but if you are struggling to share or monetise your value across your organisation, here are a few tips you can adopt:

1. 
   Quantify and showcase your impact.

   Metrics, SLAs and KPIs: Establish and track key metrics like cost savings, quality enhancements, risk reductions, and innovation success. Present these metrics in clear, concise reports to demonstrate tangible results.

   Case studies and examples: Share success stories and case studies with departments illustrating how procurement initiatives have directly impacted your organisation’s bottom line or improved operations. A little internal marketing goes a long way and could well get other departments to ‘buy in’ to the benefit of early engagement with the procurement team.

2. 
   Align with organisational goals.

   Connect procurement objectives: Ensure that your goals are directly linked to broader organisation objectives. Demonstrating alignment underscores the strategic significance of procurement.

   Highlight your contribution: Emphasise how procurement initiatives contribute to fulfilling the organisation’s mission, whether it’s sustainability, growth, operational efficiency or customer satisfaction.

3. 
   Engage in collaborative communication.

   Provide regular updates: Share frequent updates to various business units about ongoing initiatives, achieved milestones, and future plans. Use newsletters, meetings or internal communications to share relevant information.

   Seek feedback – and act on it: Actively seek input and feedback from other departments and then action that feedback (if appropriate). This will prove your understanding of their needs and help to tailor procurement strategies, as well as showcasing a commitment to collaboration.

4. 
   Visual presentations and storytelling.

   Visual reports: It doesn’t have to be death by PowerPoint or Excel doom! Use charts, graphs, and infographics to present data in an easily digestible format. Visual aids can effectively convey complex information and make your procurement team and operation seem more accessible to all departments and teams.

   Narrate your impact: Craft compelling narratives around successful procurement initiatives (see case studies and examples above) illustrating their impact on the organisation’s success.

5. 
   Educate and empower.

   Training sessions: Conduct sessions or workshops to educate other departments about procurement processes, benefits, and their role in the organisation’s success.

   Internal resources: Create internal resources like FAQs, guides, or presentations explaining procurement’s role and potential impact on different departments, but remember tip 4!

6. 
   Highlight strategic partnerships.

   Supplier collaborations: Showcase collaborations with suppliers that led to significant improvements or innovations. Highlight how these relationships positively impacted the organisation.

7. 
   Engage senior support.

   Executive briefings: Present regular updates and reports directly to senior leadership, emphasising the strategic importance and impact of procurement and the need for early engagement.

   Leadership advocacy: Encourage leadership to actively advocate for procurement’s value and contributions within the organisation.

8. 
   Continuous improvement and transparency.

   Transparent reporting: Be open about successes and challenges. Transparency builds trust and helps others understand the complexities of procurement’s role and the value they can add.

   Continuous learning: Demonstrate a commitment to improvement by sharing how procurement is evolving to meet changing industry landscapes and best practices.

By employing these strategies, procurement teams can create a more profound understanding of their contributions to the wider organisation and establishing themselves as integral components of success.

How can eXceeding help?

Procurement consultancies, like eXceeding serve as allies in this journey. We offer crucial support in challenging areas, such as defining metrics, aligning strategies, crafting clear and digestible processes and supporting documents, and building stronger relationships with both internal and external stakeholders.

Don’t be afraid to reach out for support, we are more than happy to discuss your challenges and help you showcase your value across the wider business.

Get in touch for a chat today, either by email or by phone: 0330 088 1630.