By Bill Huber, Director, CPO Services, TPI and Shahid Bhatty, Senior Advisor
IACCM (International Association for Contract and Commercial Management) recently commissioned a global study of procurement professionals, across a broad spectrum of industry verticals, on the most pressing issues facing them in the current recessionary environment. Almost 80 percent of the respondents indicated that the most pressing challenge facing them in 2009 was generating cost savings for their organizations. The other challenges outlined were risk management (resiliency of supply/service chain, managing of legal terms and risk) followed by an ability to procure goods/services.
The survey respondents were also asked to identify which areas had the greatest impact on their ability to achieve their stated goals. The results are listed below:
So, the question is – how can procurement organizations overcome the barriers listed above? What can a procurement organization do to raise its profile within the company and be seen as the primary vehicle in setting up supplier relationships and performance? How can it overcome the lack of resources or the lack of visibility into spend patterns? How can it ensure that procurement policies and procedures are implemented?
One obvious solution is to grow from within and raise the stature of the procurement organization with the C-suite. But in order to do this, a procurement organization has to know how to relate to the C-suite. This includes abstract skills such as managing perceptions, framing procurement in the context of the big picture (not single mindedly framing the big picture in the context of procurement), and managing provider relationships judiciously and collaboratively (not autocratically). It also includes the financial savvy to articulate the business case, risks and operational requirements for real benefits. For example, the procurement group of a major IT services company created a procurement business plan every year outlining:
- Savings to be generated by the group, typically via planned strategic sourcing activities
- Planned investments by the group in order to attain the savings
- Participation level required from internal stakeholders/users to participate in sourcing activities
- Operational services levels that will be established with internal stakeholders/users of the procurement group
The plan, presented to C-suite annually co-signed by business unit leads, ensured that the group received a higher profile within the company and that changes implemented for savings were used to monitor the group’s performance in a similar manner to any other business unit.