Four factors that define procurement excellence – expert

Paul Snell is managing editor at Supply Management
7 May 2015

Procurement playing a role across the entire value chain is the common theme among organisations regarded as leaders in the profession.

According to Theano Liakopoulou, partner at McKinsey, these “integrators”, sometimes also referred to “co-ordinators”, lead discussions across the value chain involving suppliers, other functions, and look for value beyond the traditional dimensions of price, scale or contract terms.

Speaking at the Procurious Big Ideas Summit in London, Liakopoulou highlighted four initiatives which define procurement excellence. These were:

1. Leveraging supplier markets smartly. These organisations offer bold 'make versus buy' decisions, and have a better approach to managing outsourcing deals.

“Make versus buy decisions are often happening without real knowledge of the capabilities of the suppliers, and without the involvement of the procurement function,” Liakopoulou said.

She named Apple and the Chinese car manufacturer Qoros Automotive as leaders.

2. Supplier development and collaboration. Those who do this well create 15 times the value of the average relationship, she said. Toyota were cited as an example of a company doing this well.

“Clearly leveraging some of the internal best practices in terms of manufacturing and lean to work with their suppliers. They are very selective about who they do this with, and systematic about how they do this,” Liakopoulou added.

3. Design-to-value. Procurement leads discussions on what’s waste, and what adds value to enable trade-offs.

“People often say this is usually a product development role, what’s the role of procurement?” she said. “Procurement can bring supplier insight, innovation, information around the value add of certain features, and the facts around what the customer really values, which is often missing from product development decisions.”

Companies are now talking about “procurement engineers”, who provide a liaison with product development teams.

4. Analytics. “Procurement sits in a very privileged position in the value chain to have an overview of all the factors that affect value and to be able to provide transparency around decisions to the business that goes well beyond the function,” Liakopoulou said.

She said many functions were building analytical capability to analyse the impact of both internal and external factors on business decisions to add superior value and competitive advantage to the company.

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