Procurement departments are still too often perceived as being "the bad guy" and a little narrow-minded. In many companies around the world, procurement departments are at best stopping individuals from buying whatever they want. At worst, they are a burden that slows down the deployment of innovative ideas.
However, the strategic role of procurement is evident in spite of these clichés, even against a backdrop of economic downturn and geopolitical tensions. The challenge for companies, both for executives and other departments, is to change that perception in order to take more advantage of the growth potential that procurement departments offer.
Companies can improve by getting over six misconceptions about procurement:
- "Procurement departments have one role, and that's to reduce prices".
- "Procurement departments are there to squeeze as much as they can out of suppliers".
- "The processes set out by the procurement department slow us down".
- "Except for in certain technical areas, there is nothing to gain from collaborating with procurement".
- "The only good quality of a buyer is their ability to drive a hard bargain".
- "The department only requires an operational level of management".
How can procurement departments win over companies, without focussing on low costs?
In reality, when procurement departments make decisions, cost is just one of many criteria. Several other factors are also taken into account when procurement departments evaluate a relationship, such as:
- The supplier's production capacity
- The logistical reliability of the partnership
- The sustainability of the relationship, and increasingly, the supplier's ethics
Understanding the real needs of different professions and controlling risks takes up much more of a buyer's time than the quest to find the lowest price. Documenting the strategic decisions made by the company is also a key part of the procurement department's role.
How do procurement departments benefit from an intelligent relationship with their main suppliers?
The popular image of buyers squeezing their suppliers still remains. However, the two major challenges facing the procurement industry today are the intelligent distribution of value and enduring collaborations.
To a large extent, innovation can be found with suppliers and providers themselves. The track record of those placing orders is determined by the regularity and quality of deliveries of components. Unless you consider buying as being completely down to chance, it is easy to understand the interest in a balanced relationship with strategic partners.
What is the real purpose of the processes introduced by procurement departments?
Processes that are introduced by procurement departments are there to maximise the gains from agreements for the benefit of the company and its departments. With a view to digitalising procurement, there is obviously a strong need for compliance. The level of quality and completeness required when collecting data, is a major factor in the company's continued progress in terms of procurement.
Buyers often have an educational role to play, and all company employees have everything to gain from a smoother, clearer and more traceable purchase request management process.
Who does the procurement department need to communicate with, within the company?
Transforming procurement into a business partner is based on an open approach to internal relationships within the company.
The procurement department is at its best when it engages in regular, in-depth and balanced discussions with the production, R&D, development and marketing departments for example, as well as the quality and finance departments.
What are the qualities of a modern buyer?
These qualities represent another cliché that needs to be quashed. Buyers' skills are in no way limited to negotiating the best price. Analytical skills, the capacity to sustain win-win relationships and being able to step back are all essential qualities. At a time when digital transformation is a priority for most companies, a digital mind-set is by no means a disadvantage.
Who should manage procurement?
Those companies that have been able to give the most relevant answers to the questions above are also those that have a procurement management structure. In these companies, the Director of Procurement also sits on the Management Committee. As a result, companies can fully benefit from the business potential offered by procurement, and this stimulates collective buying intelligence at the highest level.
By promoting recognition of the strategic role of procurement through management, these leading companies are changing how other departments view the profession more quickly than ever before.
In conclusion, companies still overlook the strategic development of procurement too often. Everyone must make the effort to change their perspective to allow organisations to fully benefit from this transformation. If you're still not fully convinced, take a look at the "What will 2030 look like for procurement?" article.