How to get to 100% value creation

9 August 2017

As procurement professionals, what do you think your suppliers think of you – and do you care?

Do they see you as hard edged negotiators who want to strike the best deal based on price alone – or do they see you as relationship driven, keen to create more visibility within the business and developing inter-dependent relationships with your supply base?

As a firm which is entrenched in the procurement community on a day to day basis, we know that you want to be seen as the latter, but are the systems and tools you have in place sometimes working against you?

For example, we have come across several instances of e-procurement tenders to supply procurement staff where it appears that decisions are made purely on price, as feedback on an unsuccessful bid has told us that no marks were allocated for a specialism in procurement. Surely that just means a race to the bottom and a compromise on quality?

So, what’s the answer?

I was listening to an interesting presentation by procurement digitalist Bertrand Maltaverne, who suggested that sometimes procurement can hide behind a process or a piece of technology and forget that business is about relationships with people.

He also suggested that if procurement wanted to be seen as a strategic function by stakeholders then it also needed to look at the value it adds and communicate that effectively.

We come across many procurement functions which are doing just that – winning the hearts and minds of the key stakeholders and recognising the value that their supply base can offer over and above price – but it’s by no means endemic.

So why is this? According to Nick Jenkinson, senior procurement director at Astellas Pharma, it’s because we aren’t focusing on 100% value creation. At a recent conference, he talked about how procurement functions often bring in great talent and then are comfortable with them undertaking activities that are effectively non-value add.

If we want to get to 100% value creation Jenkinson says that the first thing to do is to look at how procurement truly creates value for the business. Once the value proposition is clear, he says that it’s then about focusing purely on those activities that support that value creation – and removing those that don’t by automating them.

That way the core function of the procurement role becomes 100% value creation.

Wise words – and it looks as though technology will play an ever increasing role in the procurement functions of tomorrow – we already have robotic process automation, while cognitive procurement and AI is coming.

If Jenkinson’s vision becomes reality then it does look as though there will be a real recognition of the value that procurement adds both to the top and bottom lines of a business.

A final thought

Let’s not forget that human element and let’s remember that whatever is being sourced, particularly if it’s talent from a supplier like ourselves, there is only so much that can be automated.

If your suppliers have deep specialisms in your market then make sure your e-procurement system isn’t deselecting them based on what it doesn’t understand.

Because if you don’t get the right talent in – that vision of 100% value creation is unlikely ever to become a reality.

☛ Gary Noble is joint managing director of 1st Executive

LATEST
JOBS
London
GBP40000 - GBP60000 per annum +
Bramwith Consulting
East Midlands
GBP70000 - GBP75000 per annum + Excellent Package
Bramwith Consulting
SEARCH JOBS
CIPS Knowledge
Find out more with CIPS Knowledge:
  • best practice insights
  • guidance
  • tools and templates
GO TO CIPS KNOWLEDGE