Redefining Procurement Series: Procurement as a strategic business partner
Posted by Chris Gayner on Tue, May 03, 2011 @ 03:48 AM
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Looking back over the past three years, UK Plc (as well as global business) has seen some radical changes in light of the economic crisis – most notably how cash flow and costs are managed across the business.
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According to the Financial Times, the UK economy is seeing a ‘moderate improvement’ (Lloyds Banking Group announced a pre-tax profit of £2.21bn on 25 Feb compared with a £6.3bn loss in 2009). With the economy starting to claw its way back to normality (normality is still yet to be defined - for that matter, what will the new normal look like?), I thought it might be worth stepping back for a moment and briefly looking at the main implications of the economic crisis on UK businesses:
- Implication 1: Reduced consumer and business confidence (reduction in spending)
- Implication 2: Increased perceived Risk (and risk aversion activities)
- Implication 3: Talent Management (acquisition and retention)
All of these implications have had a direct impact on the ability of businesses to attract new and manage existing cash efficiently and effectively – which has resulted in Finance sitting up and looking for solutions…fast!
As a result of the critical focus on cost, Procurement has come to the surface as the key to unlocking huge cost reductions from the supply chain up.
Procurement is uniquely positioned within organisations as it is somewhat of a linchpin for expenditure – with the ability to influence (to some degree) the annual spend of all functions within a business, the question is “why aren’t all functions leveraging Procurement in the same way as say Finance or HR? Why isn’t Procurement an indispensable partner of the business?”
The comparison of Procurement with Finance is not an uncommon one. If we look at Finance 5 to 10 years ago, we see a not so dissimilar situation. Finance was traditionally seen as bean counters, back office, middle men whose purpose was to cash cheques and make sure that bills were being paid (sometimes on time). Skip forward to today – Finance is seen as a strategic element of any organisation, with board level representation by the CFO who often holds a cushy chair next to the CEO.
So what is Procurement missing to progress forward?