The traditional approach to Procurement is, in my opinion, dead!
The tactically led approach that is focused solely on cost reduction should be packaged up and filed in the folder – “Do Not Use”
So, is this the end of the Procurement function?
In fact, this realisation could and should be the catalyst for procurement professionals to become a much more integral part of the Executive team.
The Procurement professional in the future should be completely focused on delivering value to the bottom line – this is what all organisations, irrespective of size, require to grow and continue to flourish.
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A focus purely on cost reduction is too limiting and will and does lead to short term tactical activities aimed at reducing costs – typically by squeezing suppliers, whereas a more rounded review of the business requirements could and often does lead to significantly greater value being identified.
Moreover, in my experience, this additional value is actually delivered to the bottom line, whilst in many occasions a simple focus on cost reduction fail to deliver such benefits.
So, what does this mean for the Procurement industry?
What does it mean for us Procurement professionals?
To thrive in the future and to position procurement and yourself at the centre of the organisation, as an integral element of the success of the business, new skills and a new approach will be required.
Your success will be determined by your ability to think and operate more strategically, to consider the longer term objectives of the business and to think outside of the box in terms of identifying and ultimately delivering longer term value.
You will need to consider the three core elements of business success – People, Process and Technology.
You will have to work in partnership and collaborate with your suppliers, encouraging innovation to deliver ongoing financial and operational benefits to the business.
You will need to consider the end to end client/ customer journey, and understand your role in ensuring that this is optimised.
You will need to embrace technology and automate processes where value is available whilst ensuring that this very technology doesn’t inhibit innovation.
Are you ready for such a change?
If you’re answer is No, then I’m afraid to say, your days are numbered.
With the increasing adoption of clever analytics, the value delivered is becoming and will continue to become much more visible. Continuing to do what you’ve always done, where ‘success’ has been declared based upon a strong negotiation or reduction in unit prices, will increasingly be seen as dysfunctional, given the lack of value that is often translated to the bottom line from such approaches.
Success in the future will be determined exclusively by the Value that You Deliver to the Bottom Line.
My Book – The C.O.S.T. Optimization Formula provides you with a step by step approach to implementing the necessary change in approach and for a limited period, you can download a free copy by clicking here
Ramesh Krish, CPO of the Presbyterian Healthcare Services describes the book;
It lays out a complex process in a simplified manner. It captures the evolving and challenging landscape procurement leaders have to address on Day 1 and your book lays out a nice roadmap.
Download your copy today and let me have your thoughts.