Buyers must break free from the cost cutting cycle
When asking the question ‘how can procurement become more strategic in a business?’, a common piece of advice I have heard is to align the goals of procurement with the objectives of the business.
I have often wondered who isn’t trying to do this when setting the objectives for their department, given it seems lunacy to have the function moving in one direction, when the business wants to achieve something else.
But perhaps it is more common than I thought. As we report today, the number one priority for buyers in 2013 is to cut costs. At the same time, a survey by PwC has found the major aim for UK CEOs this year is to expand their customer base.
That’s not to say leaders of UK companies aren’t interested in reducing costs. With 83 per cent planning cost cutting initiatives, they are in fact more enthusiastic than their global counterparts.
But many CPOs have raised the danger of procurement being pigeon-holed by this focus on cost reduction. If the priority for the year is to cut costs, when next year’s priorities come round, who is the business going to approach to reduce costs? It’s recognition of success, but the start of a vicious circle difficult to break.
Attracting new customers isn’t traditionally a role procurement plays, but why shouldn’t it? Buyers are often the
first working in those juicy new emerging markets full of potential customers, dealing with suppliers who might have an idea for the next must-have product or even setting out ethical commitments that could provide competitive advantage.
After all, I would imagine the quickest way to become a strategic function is to help the CEO achieve his goals.
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Paul
I agree entirely with your sentiment. However, cost reduction is an easily measured ‘bang for the buck’. The simple truth is that CEO’s want results from their procurement departments and the managers need to be seen to be delivering.
Forward thinking leadership in any organisation will dictate what it values as important from the supply chain. We in procurement are primarily responsible for being stewards of the bottom line.
Sometimes, organisations don’t know exactly what direction they need or want to go in. Now how do we ‘align to this’? In this case the procurement organisation must exhibit agility and a sixth sense.