Do You Know Why Procurement Really Matters?

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Few salespeople understand how much procurement really matters to the organization. Even if salespeople are not directly selling to procurement this myopia can result in avoidable frustration, not to mention lost sales!

Are You Indifferent To Procurement?

Salespeople/sales teams are often taken by surprise at the growing power and influence of procurement within their customer organizations. How much procurement matters is little understood.

Does procurement matter to the CEO and CFO of the organizations you sell to?

We often ask salespeople to list off the reasons why procurement matters, typically adding ‘why it matters to the CEO, CFO and even the board’. The first one or two answers are easily provided, with cutting costs and policing how the organization buys being mentioned.

Beyond that however the level of insight to procurement’s role in the large organization is generally lacking. Indeed, there is often a level of indifference around the subject. After all, why does it matter whether procurement matters? Well, it matters because failing to appreciate the role and power of procurement can result in costly shocks and surprises.

Does, or should procurement matter to you?

If procurement matters to the organization it has to matter to the salesperson. Sellers have to know and understand exactly what they are dealing with. That even applies for those who have limited direct contact with procurement at this time.

Why Procurement Matters

There are many reasons why procurement matters, but they all amount to the same thing – Superior Business Performance. What that means and how it is achieved can be shown visually as follows.

What the above diagram shows is that procurement is fundamental to business success. When employed effectively it delivers superior business performance. Taking each part of the diagram from top to the bottom, procurement does this on 3 levels:

1. It is driven by corporate strategy (as well as driving corporate strategy in turn).

2. It is targeted with delivering financial results in terms of:

– The Bottom line
– Working Capital
– The Balance Sheet

3. It helps meets 3 key competitiveness opportunities, or challenges head on:

– Globalization, including outsourcing
– Alignment demand and supply
– Resilience and Risk management

You can click on any of the above for more detail.

Spreading The Secret

Procurement’s potential to deliver superior business performance is a well kept secret in most organisations. However, if you want to see it in action then look no further than the companies that lead their industries in so many sectors.

The big names that we love – Apple, Amazon, Dell, Wallmart and so on – are the embodiment of superior business performance via procurement and supply chain management excellence. More over how they buy today is how all our customers will buy tomorrow.

Have you been underestimating the role and power of procurement?

The word about procurement and why it matters is reaching a new much wider audience. Challenging market conditions have put the spotlight on procurement.

In so many large organisations the CPO is the CEO and CFOs new best friend. That means procurement has power and influence like never before. It is increasingly difficult for salespeople and others to avoid.

When Procurement Doesn’t Matter

What does the opposite of best practice procurement and supply chain management look like? Well, here is what happens when procurement gets little management attention, or is treated in a non-strategic manner:

Quite simply there is no point in having the best products in the world if you cannot manufacture them at low cost and deliver them speedily into the hands of your customers. Great products need great procurement supply chain management.

The above diagram is a visual explanation of why almost every high profile corporate turnaround strategy – such as for example the turnaround of Harley Davidson, or IBM, have had procurement SCM at their core. Great businesses require great procurement and supply chain management.

The Implications For Sellers

So, have we changed your perception of the role of procurement and why it matters? If so, how can you use this new appreciation to engage more effectively with procurement. Remember even if you don’t deal directly with procurement you can appeal directly to its agenda. That requires being familiar with the 6 items in the diagram.