By Jim Wetekamp
There’s a vast difference between the world’s best-performing procurement teams and everybody else.The top procurement teams drive the growth and profitability of their organizations and create an unrivaled financial advantage over competitors. The rest? They still operate as a back-room function, adhering to conventional procurement practices that are no longer suitable for today’s marketplace.In fact, we’ve found that on average, top-performing procurement teams can increase savings two to three times to deliver a thirty percent improvement in profitability – substantial numbers by any calculation.So what separates the best from the rest? When the playing field is relatively even, the differentiation ultimately comes down to an organization’s people, approach and technology. Taking technology out of the equation, here are a few questions to help assess where your procurement team is today, and how it needs to evolve to better compete in today’s marketplace and unlock its full potential.
- What drives your procurement strategy?
Conventional procurement strategies are motivated by efficiency, savings and risk reduction. While the top-performing teams see these three elements as important, their motivation stems from something larger and significantly more critical: effectiveness and value creation.It may seem like a small point, but it’s actually a critical differentiator. Is your procurement strategy reactive to company, market and budget needs, or is it actively influencing company direction, strategy, brand and profits? That mindset impacts everything. Conventional procurement tends to be scattered in its delivery, lacking a connection to real business objectives. This approach focuses on one-off sourcing events and initiatives that accomplish procurement-centric objectives. On the other hand, unlocked procurement strategies take long-term value creation into account for every decision they make, and consistently measure results outside of their four walls.
- How do you approach the market?
Conventional procurement teams act as middlemen – negotiating deals and mediating contract disputes between buyers and suppliers. Their sourcing approach is tactical and straightforward – we need this product, with these exact requirements, packaged and shipped this way, and of course, for as cheap as possible.Unlocked procurement approaches, on the other hand, redefine the buyer and supplier relationship. They take a holistic view on how to create meaningful business value for all parties involved, and prioritize innovation and quality over risk and costs. The sourcing approach is supplier-centric, agile and driven by data – especially for their most complex and strategic categories. They know that strictly-defined tender requirements could hamper supplier innovation, and often lead to a worse overall deal for their organization. Instead, they are open to all potential outcomes, and willing to be flexible to secure the deal that provides the most value across the board – prioritizing the needs of buyer, supplier and ultimately, the consumer or end-user.
- How is your procurement team perceived internally?
Conventional procurement departments still operate as a back-room function; they are viewed internally as a tactical, but necessary, cost-center. The IT investments into procurement technology tend to be low, and employee adoption follows suit. The result is poor contract and spend compliance. On the contrary, the top-performing procurement teams are viewed internally as a vital component to an organization’s success. They have a seat at the management table, often in the boardroom, and their procurement strategy aligns with and directly influences everything across the organization – from marketing and branding to engineering, finance and sales. The supply chain and procurement insight they bring to the table is valued across the organization, and influences every decision, from demand to contract.
Where does your procurement organization stand today? The bottom line: moving from conventional procurement methodologies to an unlocked procurement approach is critical for driving results in today’s marketplace.
Chief Executive Officer
LinkedIn Profile: https://www.linkedin.com/in/jwetekamp
“Procurement’s increasing responsibility spans the entire value chain of the organization. Once only supporting a set of operational silos of activity such as purchasing or negotiation, procurement now is a critical enabler across all major processes touching sales, production, development, and marketing”.
Jim was appointed CEO of BravoSolution in October 2014 and is responsible for driving the company’s strategy and execution. Jim joined BravoSolution’s corporate leadership team in 2008 through the acquisition of VerticalNet. He brings over 15 years of technology and procurement industry experience. He previously served as BravoSolution’s Senior Vice President of Product Strategy focused on extending the company’s technology leadership and new market growth opportunities. Jim holds a B.S. in Accounting from Indiana University.