Insights & Ideas

Three Ways to Improve Supply Base Value

Procurement organizations have been struggling with two key challenges over the last decade:

  • How do we break out of silo mentality whilst still retaining our functional credibility and relevance?
  • How do we truly become a partner in the business and a valued part of our company’s competitive advantage?

There is, of course, no easy answer.  If there were, I suspect you would have figured it out by now. There are, however, ways of re-framing and re-positioning procurement capabilities rather than just the procurement function to enable a different dialogue and ultimately a more relevant value proposition.

It’s easy to see how we got here as a function, we have spent much of the last 20 years advocating for this function we call procurement to own key areas of the business. We should own the suppliers, we should own the sourcing, the negotiating, the contracting. Only we have the skills to do this properly. We’ve argued that it’s not about savings (although we strangely keep coming back to that emotive topic at every turn) we’ve argued it’s about compliance and risk management and supplier innovation. And in doing that we have built, wittingly or unwittingly, a silo all of our very own.

Our traditional approach to ‘Value’ will not sustain us going forward

The answer, or part thereof, of the two questions posed at the top of this article is to exceed at the second one and, in so doing, at least, change the silo into a something more recognizable to our business partners as a competitive advantage, something to be engaged with because it helps us sell not avoided because it gets in the way.

One key area we need to focus on is how we look at ‘value’. What does it mean to our business versus what does it mean to our function?  When I look at the various indices that are produced to show who is top of the pile in procurement or supply chain, I usually see a set of functional values with measures against them. Things like ‘cost to procure’ or ‘transactional automation’, I rarely see anything that would be meaningful to a sales director or more importantly to your company’s’ customers.

So you can see where I’m going, we need to think more about commercial value and what we can do as procurement professionals to influence this and find different ways of managing the operational functional values that might be needed but perhaps shouldn’t be front and centre of your modus operandi.

Why should we go beyond this traditional notion of ‘Value’?

As businesses struggle with the increasing pace of change, there is little room left for siloed behaviours or for functional objectives for their own sake. Everyone in a business should be cognisant of where the revenue comes from and how they can help drive and sustain that revenue in line within the regulations that surround us.

It’s no longer good enough to hide in your cubicle and think that that is what the sales and marketing folks do. You need to be out in front of the commercial realities of your business and thinking about how your skills and capabilities can add real opportunity into your sales processes. More than one CEO has said to me that ‘you can’t save your way to success’ and, of course, they are right.

In my career, I have worked on both sides of the fence, in procurement leadership as well as in business development and sales. When you make that crossing from poacher to game-keeper, if you will, you realise that there is an awful lot of commercial opportunity and value sitting right there in the supply base.

New value and why it’s important

I see value being created in three key areas:

  • Internal Skills and Capabilities:  Firstly, procurement professionals have a wide range of skills that lend themselves well to finding and building ‘value’. We typically analyse well, we understand spend and cost dynamics and we know how to build relationships that work. We navigate complex environments and we tend to be diverse and global in our thinking. So, we need to take what we have here and re-frame it with a goal of making it commercially relevant. Good sales people typically have many of the same skill sets (with perhaps a few more extrovert personality traits thrown in for good measure) the only key difference is where and how they apply them.
  • Re-configured internal engagement strategies:  Stakeholder management is a continual bug-bear of mine especially on those occasions when I hear Procurement professionals refer to internal stakeholders as ‘customers’. They are not customers but if you treat them like they are you will stay in your silo running hither and thither at their behest. You will never get out of the transacting mind-set and you will always be trying to justify your existence. Re-thinking how you approach internal relationships is key to driving an alternative agenda and demonstrating how your command, knowledge and skill in Supply Base Management can drive commercial success for your business.
  • Re-configured external engagement strategies:  Our traditional external engagement strategies have tended to be initiated largely with a transactional sourcing goal in mind. Whilst supplier innovation methodologies and SRM have helped us engage in more robust relationship building, they are typically deployed later in the contractual relationship and if we’re honest, often when we want more from them. It’s amazing how often the word ‘partner’ comes out of the box when more savings or additional un-forecasted volume is required. Commercial value comes from being the conduit between our supply base and our company’s customers, this is easy to say and hard to do but linking supply base capability to customer needs and demands is key to commercial value creation.

So, maybe it’s time to change your thinking on ‘Value’…..

In the upcoming webinar I will be talking more about this relationship of supply base to customer and how as Procurement professionals we have far more ‘value’ to offer and far more ‘value’ to deliver if we can re-set our goals and re-align our intent.

If you would like to learn more value, please join me in a webinar, “How to find hidden value in your supply chain,” on July 19, 2018.  Register here.

About the author:

David J Ward is a Supply Base Management and B2B relationship expert. He has spent over 20 years in Procurement Leadership roles as well as Business Development and Sales. His work has taken him into some of the largest organisations in the World and across many different industry sectors. He is at his best when challenging norms and applying disruptive curiosity to difficult business problems. David focusses on capability development and how organisations build skills and competencies rather than functions and silos, he is driving the thought leadership agenda on digital Procurement and Supply Base Management.  He can be contacted at david@aviduspartners.com.

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