5 things your procurement leaders should be doing to improve effectiveness
Procurement can have a bad rep. Unfortunately, sellers associate procurement with “bad cop”, and someone who’s only concerned about getting a bigger discount. For buyers, such as marketing and sales, only 4% consider procurement to be effective, despite continuous evidence to the contrary. It’s critical that procurement is viewed as the strategic partner it is in order to create the best outcomes for both buyer and seller.
In order to become more successful, controllers and other procurement-related professionals can take action to reduce this ‘perception gap’.
Begin with understanding
Procurement must first develop a deeper understanding of how they can best support other departments. It’s likely that few of procurement co-workers from other teams understand the extent of procurement responsibilities, but how much do procurement know about the challenges other departments face?
Procurement professionals can utilise outsourcing to reduce their workload, enabling them to spend more time with their buying departments; what are their primary functions, the objectives they set for themselves and the critical issues they confront on a regular basis? It can also be helpful to understand how the products they buy serve the needs of the organisation, and how they fit into the IT stack.
Communicate Success
The key to addressing perceptions is exposure, consistency and familiarity. Procurement needs to be proactive in establishing their value proposition and communicating it to other departments. Once traction is gained, success stories should be communicated via newsletters and case studies to further drive engagement and reinforce improved perceptions.
Alignment across all teams is critical to organizational success, and procurement can play a huge role in increasing the bottom line. Freeing up the administrative tasks of software and renewal management frees up space to communicate strategically and focus on relationships.
Know other’s expertise
Procurement is clearly a need for companies who spend a lot of money. The role of procurement is to define the process of purchase, ensuring that those things are delivering the right amount of value, and ensuring that the company is paying the right price.
However, procurement professionals should also not be seen as the experts in all aspects of the buying process. Engineering and quality departments often distrust procurement as they seem to exist just to cut costs. Procurement should emphasize their expertise in building mutually beneficial supplier relationships and best-in-class contracts. While the sourcing process does (and must) evaluate cost, it also looks at the qualitative aspects of supplier capabilities and aims to align those with stakeholder needs.
Get involved early and set expectations
Procurement shouldn’t be introduced as the last step. They should spend time with the buyer as early as possible, and the seller towards the end of the sales process (even if there is more than 1 vendor in the mix), in order to learn the core value proposition of the tool and learn ‘the why’. Relationships between IT and software vendors is becoming more and more critical as technology changes the landscape and the role of the CIO, and maintaining a positive relationship in these early stages can set up two fast growth companies for mutual success.
Procurement can work with internal stakeholders and existing relationships to understand the seller’s timeline and mutually agree upon a close date, regardless of vendor selection. Utilising their intrinsic negotiation skills, they can ask questions to discover things that are of value to the seller and easy to give from the buyer (ie: use of logos, case studies, references, etc). Often known in negotiation as ‘expanding the pie’, adding these items can create win-win situations and elevate the buyer-seller relationship.
Transparency is king- internally and externally
Be transparent. Yes, procurement wants a reasonable/fair price. No, they don’t need to do a song and dance to get it. Lean into transparency in order to work with the seller to accomplish procurement goals. Procurement is a team sport when operating in the technology market built on relationships and strategic partnerships.
Internal buyer perception that procurement is only out for reduced cost needs to be changed. Procurement are there to gain the best value, and stretch budget dollars, without compromising quality. Reducing costs should allow for the creation of emergency funds to be used throughout the year, and reinvested back into the department. Procurement should be engaged in the annual budget planning process and optimize all spending.
Conclusion:
Procurement has an opportunity to improve perception and effectiveness amongst software sellers and internal buyers. Working with an external party to own software buying and renewal management can help procurement to become more strategic by focusing on communication, early involvement, and building organizational relationships.
