10 ways the procurement profession can improve

Alan Day
29 May 2014

State of Flux reaching its 10-year anniversary was cause for me to reflect on what’s changed in the profession. We have seen procurement grow in so many areas; increasingly viewed as strategic partners to suppliers and business stakeholders. But to continue to progress there are still plenty of opportunities to improve.

I thought I would share my top 10 suggestions (in no particular order).

1. Improve the strategic sourcing processes. There has been a lot of effort put into strategic sourcing over the last 10 years, but too often it’s a generic process, not aligned to the business and other processes. It can be cumbersome and uninspiring and because of this it is ignored or not followed rigorously. I would love to see the strategic sourcing process more easily accessible online with templates, training, top tips, guides, videos and internal ‘social’ interaction to support it. I don’t think the formal RFP is the right tool for the job anymore (read more about that here).

2. Be clear on the difference between supplier relationship management (SRM) and supplier performance management (SPM). Our annual SRM survey has given us a lot of insight into what leading practice is and unfortunately too many organisations still confuse SRM with simple SPM or worse, they have a series of meetings with a supplier and label it SRM. The benefit of good SRM is clear, it would be great to see more organisations looking to do it properly.

3. Aligning category management, strategic sourcing and SRM. There are studies showing that 50 per cent of all ‘deals’ done don’t translate to the bottom line which is a pretty scary thought. Strategic sourcing can’t work without embedding SRM into the process. It should not just be ‘step seven’ in your process. It needs to be embedded across the strategic sourcing process, so we have a clear line of sight between contract, performance and relationship.

4. Using technology (to support SRM and SPM). Over the years the procurement technology market has undergone huge changes. We used to focus on ‘one-stop-shops’ where a technology vendor would attempt to sell an overall vision of a better procurement life. Now with the advent of mobile devices, templates and apps we are seeing a far more ‘audience-driven' focus with three areas emerging: P2P software where the audience is accounts payable; Sourcing software (e-RFx, e-auctions and spend analytics) where the audience is procurement; and SRM software (SRM, SPM, risk, innovation and contract management). It’s this last area of SRM software where I think more focus and investment needs to occur.

5. Selling procurement’s value to stakeholders/internal customers/suppliers. There are pockets of people who have made great progress in this area, especially in the last few years, but we need to continue to improve the positioning of procurement’s value, being sure to align with business needs and managing expectations.

6. Getting contract life cycle management right. The simple litmus test of ‘can you put your hands on your top 100 contracts?’ is a key indicator of an organisation's contract management focus. But too many organisations still fail. Even if the contracts are loaded onto a contract management system, accuracy is often poor and the process to keep the system populated and up-to-date is often not aligned with the strategic sourcing, SPM or SRM processes. Getting this right is a key building block for procurement so it would be great to see this area get the focus it deserves.

7. Centralised, decentralised and hybrid… there is no one correct model. Organisations tend to move through the different structures. I spoke to professor Michael Lenders who for over 30 years has been studying procurement models and how they change. His view is there is no one correct model; it should move to align with the business strategy. More centralised for control (usually in tough times), decentralised for being closer and aligned to the customer need (usually in times of growth). It would be good if we get better at recognising this and create a structure designed to change with the needs rather than be rigid.

8. Get e-auctions and e-RFxs working. It’s fair to say e-auctions and e-RFxs were fashionable five or six years ago, and we have seen a steady decline in use for most clients (with a few notable exceptions). E-auctions have especially declined as businesses have struggled to sell the value to internal stakeholders. Unfortunately, the eRFx has often become a glorified email; the RFP/RFI/tender appearing as an attached document. These tools deliver value and I would love to see organisations investing in the training and change management to make them work properly.

9. Up-skill your team. Our research into procurement people and skills shows we as a profession have put a lot of effort into the technical training of our teams - but very little on behavioural elements (especially compared to the training sales or key account managers get). We often complain about not getting involved early enough with the business but don’t invest in behaviour training to allow them to have the business or executive-level conversations.

10. Stop messing with payment terms. I understand cost of capital and the accountant’s view of the world in relation to payment terms; however I believe extending payment terms does a lot more harm than good for the business. Think about it for a minute; you pay the supplier constantly every month, you change the payment terms by 30 days, all you do is get 30 days respite and then go back to paying them each month again. It’s a one-off gain.

Hopefully this is food for thought. I would love to hear your thoughts and comments on the list above.

☛ Alan Day is founder and chairman of State of Flux

You are invited to participate in State of Flux’s sixth annual supplier relationship management (SRM) survey. If you are involved in SRM, please complete the survey by Friday 27 June 2014 by clicking the link.

By completing the survey and sharing your organisation’s experience of SRM, you will receive (at no cost) the following benefits:

• Complimentary copy of the full 2014 global SRM research report, including analysis of the results, case studies and opinion pieces

• Opportunity to benchmark your organisation’s SRM activity against some of the global leaders, your industry and geography

• Individual SWOT analysis of your results

• SRM Index score to help you quickly and easily understand where you are ranked against the State of Flux SRM maturity model

For more information contact Alan Day at alan.day@stateofflux.co.uk, or phone +44 207 8420600.

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