May 16, 2023 | Procurement Strategy
Despite the growing uncertainty, the current business environment offers several opportunities as enterprises look to transform organizational functions.
For many, transforming procurement is a key priority.
Nine out of 10 chief procurement officers (CPOs) believe that CEOs and board members are now paying greater attention to procurement, as pointed out by an Ovation 2022 Pulse survey in this white paper.
They agree that procurement has a vital role in key business objectives such as improving sustainability and supply chain transparency.
Why then are they still reluctant to invest in this function?
There is no doubt that procurement has seen a fundamental shift in priorities in recent times. The function, which was primarily focused on cost savings, has evolved into a strategic business unit that has aligned its objectives with the larger business goals.
In addition to monitoring costs, procurement now focuses on building resiliency, mitigating risks, driving innovation and gaining competitive advantage.
The question now is: How can businesses strengthen their procurement capabilities? And how can CPOs convince business leadership and make a strong case for investing in procurement?
Here is how procurement can secure investment and convince business leadership:
To start with, procurement leadership must have a clear plan and a compelling message that aligns with the board’s strategic aims. Identify agendas that are top of the list in board meetings. For example, digitization, risk assessment and ESG are likely to be on the business agenda in the current environment. Likewise, building resiliency and enhancing supply chain transparency would also feature on the list.
After identifying the key business priorities, assess specific ways in which procurement can contribute to these goals. For example, how can procurement contribute to ESG goals? Can it scrutinize suppliers and set ESG KPIs as part of the contract? Identify areas where procurement can make a big impact in driving change.
Building the narrative is key to making an impactful presentation. Emphasize that the business landscape is changing quickly and how procurement can help in adapting to this change. Think about how the function is currently placed within the organization and how enhancing its capabilities and influence can make a huge difference.
Graham Copeland, senior director of business development at GEP, puts it this way: “There are many and various ways that procurement can make an impact, but you can’t do everything — certainly not at once. So, you have to design a value proposition — what do you stand for? And then how do you situate your function within the organization – considering, too, the board’s goals – to meet that remit.”
Along with value proposition, procurement teams should also emphasize the urgency of the risks involved while making the presentation. What are the risks in the prevailing business environment if the board does not boost procurement’s capabilities? Can a business continue to judge procurement merely on the basis of cost savings? Or should there be broader criteria to evaluate the function’s performance?
Finally, buy the time procurement needs to justify the investment and show returns. Automate time-consuming administrative tasks to extricate procurement from their ‘day-to-day’ work. 53.5% of respondents to the CPO Compass 2023 survey suggested that they have increased the use of automation in procurement.
As procurement looks to secure investment and expand its influence with the C-suite, it must build a strong case to convince the leadership. Emphasizing the value proposition and making an impactful presentation with an engaging narrative are vital in this process. Additionally, it must automate manual tasks to free up resources and allow them to focus on strategic business priorities.