Procurement pros struggle to achieve measurable value beyond savings

Practitioners in procurement and supply chain jobs are struggling to evolve their roles beyond cost reduction toward measurable value-adding activities, research from procurement insight and professional peer network, Procurement Leaders, has found.

To better understand the challenges faced by procurement pros in driving value beyond savings, Procurement Leaders set up a ‘Collaborative Value Project’ (CVC) including practitioners from a range of industries to establish some baseline definitions and credible methods of measurement. What is emerging from this pooling of knowledge and debate is a troubling reality – procurement still has far to go before realising the goal. Only a few of the companies involved had successful measured value-adding activities, such as revenue generation, supplier-innovation initiatives, or the number of novel ideas generated from the supplier base.

A stumbling block appears to be the ambiguity of the term ‘value-added activities,’ with different procurement pros interpreting it differently, sometimes in their own teams. In the absence of consensus, it becomes difficult to progress toward a tangible goal. The CVC project, therefore, sees establishing a widely-shared baseline definition, agreed between stakeholders and procurement pros, and between procurement practitioners themselves, as a priority. The group also suggested that storytelling can be a powerful means of disseminating to stakeholders the often complex processes workers in procurement jobs engage in to deliver enhanced value. This applies to procurement interims as well as permanent post-holders. A problem, though, is that storytelling, in the absence of corroboratory data about hard profit and loss impacts to back it up, could cause conflict with stakeholders.

The group believes that spend analytics can be crucial in this quest, although currently, a significant number of organisations lack the technology to deliver this data. Unless procurement can credibly quantify the output of their value-added activities, finance colleagues are likely to remain sceptical. CVC aims to craft a clear baseline definition, develop a list of activities that generate value beyond savings, and a KPI dashboard illustrating them.