Don’t let the expertise building up in procurement stay hidden any longer

Andrew Bentivoglio Advisory Associate, Private Company Services, PwC US February 24, 2020

Anyone looking to raise the clock speed of their organization to make the most of an expanding, specializing universe of vendors and suppliers will want a closer look at what’s been happening in procurement. These teams can be among the more under tapped sources of expertise to help refine strategies for growth and/or savings. They are working globally and opening more supplier options than ever before. Those that are ahead of the curve are finding ways to make greater use of the data being generated while interacting with suppliers and vendors.

Procurement leaders also have a role to play: What more can they do to share their expertise? Here are five ways to translate the everyday into opportunities that create value for the business:

1. Identify suppliers who can become partners in innovation

Businesses feeling the pressure to elevate the customer experience will rely on suppliers who can also act as partners. Yet these are rocky times in supplier relationships. First, shifting trade relations globally not only disrupt current operations, but can also make it more difficult to invest in long-term partnerships with suppliers. And secondly, industry consolidation has left many organizations larger and increasingly vertically integrated, essentially building in preferred supplier relationships.

There are alternatives for firms not officially tied together. Building stronger relationships with the right suppliers can help drive innovation by working together on R&D, and sharing costs and potential gain. Procurement teams are well placed to lead the identification of potential innovation partners because of their proximity to important suppliers in the market. As relationships strengthen, procurement teams may be the first to hear of new vendor products, features or initiatives that pair up with their own organization’s goals.

2. Set the pace for technology adoption

Nearly half of the 227 private company executives including CEOs/CFOs responding to a 2019 PwC Trendsetter survey say their organization doesn’t always use tools and technology to monitor and act on spending trends. Aggregating and analyzing spend at the enterprise level gives procurement teams the insights needed to target a specific category, supplier, or SKU in pursuit of savings and direct bottom-line impact.

Spending trends are just one slice of procurement activity generating data to harness. There are also broader source-to-pay (S2P) solutions, point applications, or something in the middle. S2P solutions are designed to increase the efficiency of an entire procurement function. Point applications exist to support a variety of tasks and can be a useful tool on the ladder to a more mature function. Choosing the right technology may come down to what data will likely be most helpful for growth.

3. Manage risk throughout the entire vendor lifecycle

More procurement organizations are managing risk throughout the entire vendor lifecycle. Here’s how: when choosing a potential supplier, these procurement professionals look at price, quality and best fit, yet also evaluate risk associated with working a certain supplier. And once the relationship is  established, risk mitigation standards are included on SLA (Service Level Agreement) evaluation scorecards. Thus procurement teams work toward enhancing risk management across the entire organization by more closely monitoring supplier relationships. High-performing teams can provide further strategic value by choosing suppliers that complement an organization’s goals, for example around innovation or social responsibility.

4. Tell the story (and show the proof) of the value of a high-functioning procurement team

Is your procurement team viewed as a support function or is it perceived as a strategic partner? More than 50% of leaders in high-growth private companies agree that their organization’s procurement function doesn’t always work as a strategic partner to the overall business, according to PwC’s 2019 Trendsetter report.

With a view into many functions such as supply chain, finance, and research and development, procurement teams can demonstrate how they help internal teams achieve their goals and deliver a competitive advantage. For example, consider how one team worked with a cross-section of stakeholders from HR, IT and Finance to choose a managed service provider to fill a demand for temporary labor. Working together, the group created a scorecard to select the supplier that would offer the service quality and price point that would benefit the company the most. Procurement took the lead in the project and was able to negotiate a strong agreement, leading to cost savings, efficiencies and talent optimization.

5. Move upskilling higher on the agenda

Getting the most value from a procurement organization requires putting the right team in place—not just for the problems of today, but with an eye toward the future. More than a third of procurement leaders surveyed in the Trendsetter report say they’re not certain that their procurement organization has the right set of skills and talent. Organizations can see rapid return on investment in skills like negotiation, data analysis, and vendor management. If your organization is looking to recruit new talent, it’s more critical than ever to find the right fit for short-term successes and long term growth.

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