Is procurement about putting dogma before dynamism? There are perceptions that procurement is process and compliance driven and that it is slow to respond to change. And too rigid in its approach to allow space for innovation.
CIPS, the Chartered Institute of Procurement and Supply, reports on research findings from e-procurement specialists, Wax Digital, showing that 83% of businesses surveyed did not think their supplier base could support their future growth plans.
“Certainly, in some organisations, procurement takes a cautious approach and focuses too much on cost. In all areas, especially buying IT software and hardware, this can leave businesses trailing in the wake of innovations that always seem to be at least a few steps ahead of them,” observes Jonny Michael of JMCL Consulting.
“Process and compliance in procurement are there to mitigate risk, so that businesses are not exposed to unreliable suppliers, or failing to use budgets efficiently”
“What this should do, is provide a firm foundation from which businesses and organisations can then have the freedom to innovate and expand by embracing their suppliers’ suggestions and new developments,” continues Jonny.
Strategy and Simplicity
“The thing that holds many businesses back is the lack of proper engagement with suppliers and an understanding of their businesses,” Jonny suggests.
Without clear understanding and flexibility, procurement may well end up getting bogged-down in detail, and start to feel divorced from the organisation or business they should be serving. “Detail is essential, obviously,” offers Jonny, “but so is vision.
“Your procurement function must match your organisation’s growth – in fact, it should be enabling that growth. After all, it is a support service not an end in itself”
Jonny emphasises the importance of procurement being a collaborative process – so that it embraces supplier input and dovetails with wider business objectives – and a simple one.
“Suppliers know about the innovations in their industry. Suppliers often know more about their parts of your business than the procurement function does. The right suppliers want to help themselves by helping you. That should be embraced,” he says.
Making procurement dynamic rather than dogmatic requires approaching it differently.
Rather than seeing its processes and rules about compliance as barriers to progress, they should be viewed as enabling factors.
“Too many people see the role of the procurement process as beating suppliers up on cost and compliance. A better way is to enable collaboration and partnership,” Jonny advises.
This means implementing a process that looks at a supplier’s specialist track record and what aspects of value the supplier can deliver. “Value is a crucial factor
“The best suppliers don’t just want your business, they want your business to succeed. If the performance of the supplier’s product and service contributes to your success it should naturally lead to longer contracts. Everybody wins”
Clearly not every supplier has a huge impact. Some products and services will always be a commodity. But this is where understanding of strategy and performance delivers the perspective.
To give a business the firm foundation it needs to be agile, adaptable and profitable means proper supply chain management. Procurement processes are key in making this effective.
“Enlightened procurement is as much about this management aspect as it is about selecting suppliers,” Jonny concludes .
To give your business the freedom it requires to be innovative, while safeguarding your supply chains and reducing risk, please call JMCL Consulting on 0161 209 3810, or visit jmclconsulting.com for more information.