Procurement should set business direction, purchasers told

22 April 2010

22 April 2010 | Neil Oelofse in Johannesburg

Top companies generate profit by buying well rather than by selling well, according to Absa Bank CPO Karen van Vuuren.

Delivering the keynote address at a conference in Johannesburg to launch the southern Africa branch of CIPS this week, van Vuuren – who is also a CIPS Southern Africa executive board director – spelled out to delegates what it takes to be “best in class” in procurement.

Firstly, companies expected their procurement officers to deliver savings by becoming “cost reduction czars”, she said.

The benchmark for a purchasing leader, “not middle of the pack or a follower”, was to deliver benefits of at least 4.9 per cent “per year, every year” for their companies.

“So if you have strong procurement, that means you have very good profit,” van Vuuren told delegates.

A procurement officer is also required to play a vital strategic role in contract negotiations, risk management, sourcing and processing, and charting the future for the company as an “organisational direction setter”.

The growing need to pay attention to environmental concerns was a good example of this.

“If things really go south in terms of the environment, green procurement is no longer going to be something that is ‘cute’. We have to start thinking strategically what that means in our businesses and how we, as the overall czars of cost reduction, manage that situation.”

A procurement officer was required to manage both client and supplier relationships, and had to display the courage to critically assess his or her own performance. “You can’t move forward if you can’t be honest”, van Vuuren said.

“Good is the enemy of great, if you think second in class is acceptable, be careful.”

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