If asked to describe procurement, what would you say? Perhaps a business function that buys things, writes contracts and generates savings? That’s awfully vanilla. But let’s face it: Too often, this is precisely what businesses believe procurement is. When viewed through this narrow lens of a team that only ‘buys things’, is it any wonder that the function struggles to graduate beyond the basics?
We’ve all heard the saying that perception is reality. In procurement’s case, perhaps reality is reality. The profession as we know it is fast evolving. In a few short years, many transactional and tactical roles will be automated. Only strategic, commercially minded positions will remain.
As an HR professional, why should any of this matter? Ask yourself this: If your CFO announced that procurement was to be overhauled and a strategically focused, commercially minded team was needed, would you have what it takes to help?
Just as sales needs to walk in the customer’s shoes, HR needs to understand the commercial requirements of procurement to assist in hiring and grooming talent. HR needs to show it understands a candidate’s problems, challenges, hopes and aspirations.
Not to put too fine a point on it, HR is the linchpin. HR has the opportunity to guide businesses in the selection of exceptional individuals – talent that breaks the convention of what procurement could and should do, and introduce astute, commercial professionals who love their stakeholders more than their processes.
Raising the bar for procurement
Many organisations claim that their people are their greatest resource. But if the calibre of the procurement team is any indicator, then for some organisations that statement might raise a few eyebrows.
It’s time to lift the bar, and HR has a significant role to play in doing just that. Here are a handful of attributes that will help you, the HR professional, distinguish commercially minded procurement from the regular transactional buyer.
- Sales and promotions: When procurement understands the company’s sales strategy, they are able to introduce, groom and develop suitable suppliers to see market-facing activities fulfilled faster and more cost effectively, thus allowing for much greater revenue generation.
- Product profitability: HR needs to understand the profitability of each product and service. Once you know this, it’s easier to create a procurement strategy that maintains or improves a product’s financial performance.
- Customer of choice: As the front line in supplier management, procurement can manoeuvre your business so it is the preferred point of sale for suppliers, the first recipient of new technologies and the beneficiary of favourable pricing. To illustrate this point, a staggering 70 per cent of Unilever’s innovations have been supplier contributions – impossible without customer-of-choice status.
- Risk management: Exposure to risk is expensive. A large, unexpected disruption can halt a company in its tracks. Procurement needs to be able to identify, manage and resolve risk so that the commercial impact does not affect your core business.
- Cost is more than price: Procurement needs to identify inefficient processes, duplication, excessive touch points and supplier underperformance. All these areas have a direct bearing on what it costs your business to operate.
Get this right and the possibilities for your business are considerable. HR is well positioned to help as long as it acknowledges an unavoidable truth: First, it needs to gain and understand a commercial mind.
This article is an edited version. The full article was first published in the April 2016 issue of HRMonthly magazine as “Get What You Want and Get What You Need”. AHRI members receive HRMonthly 11 times per year as part of their membership. Find out more about AHRI membership here.