Professionals in procurement jobs should move beyond their traditional focus on cost reduction and improving transactions to develop innovative ways of driving competitive advantage and shareholder value for their organisations, a prominent industry expert suggests.
Seasoned procurement executive, Peter Smith, says that cost reduction, though important, has its limitations, adding: “You cannot cut your way to growth.” But practitioners in procurement and supply chain jobs are uniquely placed and equipped to help drive revenue growth, as well as paring back on costs. Smith cites the example of a European bank whose procurement team has benefitted customers so notably that it is winning new revenue. The bank’s prospective business customers, especially smaller firms lacking internal procurement capability, are offered access to a suite of procurement tools, good practice guidelines, and templates devised by the bank’s procurement pros, who also provide telephone consultations on request.
This offering has proved to be the key differentiator for winning new business in a market where core banking services are otherwise almost identical from all competitors. Procurement teams are also beginning to harvest knowledge held by suppliers to improve existing products and services, by supporting supplier-driven innovation, or by harnessing this knowledge and innovation to boost their firm’s revenue by increasing speed to market above their competitors.
Technology can be crucial in extending procurement’s horizons and influence and improving supply chain management, but professionals, from permanent staffers to procurement and supply chain interims, must manage the basics of supplier management. This, Smith emphasises, involves risk management, supplier master data management, contract and spend analytics, and so on. Without clarity about who one’s suppliers are, what they are doing, and where they are working in the organisation, tech-driven “supplier innovation programmes,” Smith warns, “will be built on sand.” With the foundations in place, technology can support real collaborative work with suppliers by managing the work between a business and its key suppliers. The role of procurement, it seems, is extending fast.