Redefining Procurement Series: Introduction
Posted by Chris Gayner on Tue, Apr 12, 2011 @ 02:32 PM
Procurement as an indispensable, strategic partner of the business – how far off are we?
Traditionally procurement has been characterized, typecast and defined by several common activities – primarily around the Source-to-Pay (S2P) elements (see Fig. 1). Recently, technology advancements (such as automated Purchase-to-Pay / P2P software) have allowed the procurement process to become more efficient and remove a lot of the manual work, allowing the procurement team to focus on getting the best deal possible.
Fig 1. Common activities carried out by the traditional procurement function (Click image to enlarge)
If we look at procurement’s traditional definition (which is still widely accepted by both procurement and non-procurement folk) it is “the acquisition of appropriate goods and/or services at the best possible total cost of ownership to meet the needs of the purchaser in terms of quality and quantity, time, and location.” Wikipedia. We are not going to argue, this IS what procurement does…
…but it’s not all that procurement should be doing to be seen as an indispensable, strategic partner of the business!
Time to Redefine
Something that is missing from this definition of Procurement, which is critical to procurement being seen as a strategic partner, is the business engagement piece – that is to say, the need to engage with the business, understand the various stakeholders needs and ultimately change behaviours – and in doing so, influence what actually gets bought and how.
Procurement is one of the only functions that spans all departments of the business and has the power to influence expenditure on all levels. Whether it’s procuring professional services for Finance or printing collateral for Marketing, procurement can (and should) be involved in the sourcing process from the start of the planning process.
Fig 2 (below) redefines what the role of procurement should look like if it is to be seen as an indispensable, strategic partner of the business.
Fig. 2 Procurement as a strategic business partner (Click image to enlarge)
In this new definition, procurement has the power to influence (not mandate, but act as an internal adviser) the purchase decisions of each department – from specification definition and project scoping to negotiations and purchasing – allowing the rest of the business to focus on what they do best (their core job).
Coming back to the initial question, we ask you - how far off is procurement from becoming a strategic, indispensable partner at the heart of your business?
Where are we going with this?
The above is a short introduction to how we see procurement today. We will discuss the above redefined role of procurement in much more detail throughout the Redefining Procurement Series as well as various other bits and bobs we think you might be interested in hearing about – more specifically our upcoming research project which aims to uncover how procurement and finance (and the greater business) are working together to achieve the common goals of the business (drop us a line if you wish to find out more about this).
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