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Sep 17, 2017

Everybody loses if procurement is a fire department


If you were walking down the street and saw a person on fire, presumably, you would help put out the fire. But what if every single day on your way to work, there was another person on fire needing your help? Sure, you have to help, but you would wonder – why are all these people on fire, where’s the fire department, and why do I have to be the firefighter? I have a job of my own!

I find this absurd point of view applicable to how CPOs and their team are positioned in operational and tactical approaches in procurement. You’re either trying to manage the chaos of what seems like countless requisitions, maverick buying, disconnect with internal stakeholders, continuous back and forth with suppliers, or order mishaps. Or you’re stuck with inaccurate data when negotiating with risky suppliers, and you can’t say anything because that’s your only supplier. Not to mention the screaming phone calls and e-mails.

It’s like adding fuel to a never-ending fire. You’re burned out, and you only managed to achieve just the bare minimum for the company because you always have to stop doing things that are important for things that are urgent. And those two things are not synonyms.

Where to start from?

The zero step in trying to alleviate firefighting is actually acknowledging whether you’re a part of a company that encourages and eventually rewards that kind of behavior. If that is the case, it will be a great challenge to change, but not impossible. No matter the company’s culture, not one of them will say no to better savings, added value, and consequently increased shareholder value.

First, you need to adequately recognize what is top management’s driving force, whether their focus is on: short-term cost savings, sustainable growth, risk mitigation, implementing operational procedures, enforcing ethical norms or standards, etc. Then the approach is to start with small steps, i.e., by identifying low-hanging fruit that the company didn’t already pick and then building on those results. Because firefighting will only keep the company afloat, but strategic perspectives will keep it growing.

That’s the picture top management and internal stakeholders need to see from procurement, and they will welcome it with open arms if the picture is drawn just right.

How to transform procurement into a truly strategic function:

In my view, these are actionable steps  on how to transform procurement into a truly strategic function:

  1. Identify internal stakeholders, who are not always easy to recognize, especially in multi-location, multi-business units/brands
  2. Develop a procurement strategy that addresses business requirements and stakeholder expectations
  3. Diagnose gaps in own performance and competencies to drive the new strategy
  4. Develop a procurement transition plan to transform procurement into a strategic function
  5. Select people with the right competencies who can deliver strategy implementation
  6. Develop strategies for categories, then for risks and suppliers – Category / Risk / Supplier Management
  7. Install Key Performance Indicators at all levels to monitor the implementation of the strategy

As support to the above-described process, digital tools at certain stages become invaluable because they provide structure and discipline and lead the procurement management confidently through extensive amounts of content.

I strongly believe that once CPOs and their team are armed with this kind of knowledge, they can eliminate their firefighting activities because their experience and expertise can be put to far better use and grow accordingly.

Let’s just make one thing clear, this process is not instant. It requires courage, dedication, leadership, and strategic competencies, but if implemented, it will discover strategic visionaries instead of a fire department.

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