An indirect approach works better

16 February 2010
I attended an event last week, where a key topic for discussion was: How does procurement influence all of the spend with third parties? It seems many companies are still struggling to influence key areas of indirect spend, the usual suspects being marketing, professional services, conferencing and IT. Perhaps unsurprisingly, it seems there is a correlation between the maturity of a procurement organisation and the depth to which it has penetrated a company. It was also interesting to note the different language used. The more mature procurement organisations spoke about value and objective alignment with stakeholders while other, less mature, organisations spoke about the need for mandates and hostile stakeholders. I felt uncomfortable with the discussion around mandates and the need for senior leaders to impose their will – or, put another way, the insistence that people speak with procurement. I think the onus is on us as procurement professionals to prove we add value in the discussions about indirect spend. If we offer value then stakeholders will work with us. Hiding behind process and governance seems at best lazy and at worst negligent. I am passionate in my belief that category expertise is vital for developing engagement on indirects. We should understand the market and be able to speak the language of our stakeholders. More importantly, we should understand how they measure value and what we can do to drive that value for them. I believe that a key skill is to prove we understand the value equation for their area of the business and that we are focused on delivering measurable value – not just lowest cost. Sometimes the way in is as simple as identifying a problem and helping to solve it. Many is the time I have bitten my tongue where people have sourced something directly only to find that when things do not go to plan they need procurement support to dig themselves out of the hole. Rolling your sleeves up and delivering the solution is the easiest way to start a relationship with difficult or sceptical stakeholders. Deep category knowledge can also provide access to information that stakeholders wouldn’t otherwise have. If we provide them with data and analysis they become more informed and alert to what’s possible. Sometimes this data will have value to us as well: perhaps we can show stakeholders they have been overpaying for services. No senior executive likes to feel they have been taken for a fool, particularly by suppliers they have trusted in the past. It is important to remain neutral and unemotional, to use logic and be persistent (it’s probably going to take several conversations) and above all make your stakeholders famous for the right things. We should help publicise change where they drive it and savings where they are prepared to change established practices. Finally, pick your battles wisely – maybe leave the cost discussion for later and focus on getting defined deliverables, service level agreements and other key commercial terms incorporated in future engagements with suppliers. By demonstrating how we can help our stakeholders successfully manage their supplier relationships we earn their trust, and in doing so gain an opportunity to move into previously uncharted waters. Sam Covell is head of IS procurement at AstraZeneca (samcovell@hotmail.com)
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