It's Not Your Father's Procurement

I was recently invited to speak at and help facilitate an executive roundtable by a firm called Denali Group, who specialize in procurement and supply chain consulting. The audience was made up of high level procurement executives from a variety of companies, some well known (such as Johnson & Johnson, Duke Energy, PG&E) and others less so. The theme of the roundtable was how to make procurement more innovative, and Denali asked me to talk about Innovation X and also to facilitate a brainstorm session.

Now I didn't really know much about the world of procurement so I was really coming in as an outsider. I admittedly had some views of procurement that are pretty stereotypical - stodgy, rigidly process-driven, almost entirely focused on cost. What I found was that these executives were trying as hard as they could to get away from those stereotypes. Indeed, they had a passion for procurement and finding ways to grow and use it more creatively that was refreshing and unexpected.

Not to put too fine a point on it, procurement needs a brand makeover. Indeed the word itself clearly made some of these executives feel boxed in to an old-school mentality that pushes procurement into a tail-end function that's only focused on cost containment. It begs the question, how many other organizational functions are in similar positions where there is a disconnect between internal and external perceptions about their (potential) role and value? IT and human resources come to mind as two common ones.

A few ideas that percolated in the roundtable piqued my interest in particular:

Top-line growth not just bottom-line savings: Traditionally procurement has focused on cost savings. These are increasingly difficult to come by as supply chains get optimized, and so attention has shifted to how procurement can be used to add value to an organization by helping grow the top line. Create revenue instead of just reduce costs.

Better articulating needs to suppliers: When selecting vendors/partners to work with, there are often intangible reasons for choosing one over another that have little to do with price. There are qualitative factors (like cultural fit, perceived uniqueness of offering) that can be as important as more traditional quantitative measures (like cost, time to market). But what the executives also talked about was that it was often difficult for groups inside their organizations who were looking for outside vendors/partners to articulate what they were looking for from that outside organization. This obviously makes it difficult to identify the best one, work with them on developing the requirements, and deciding if the end result is successful. The challenge for the procurement group then becomes how to help make this translation of unarticulated needs better and clearer, putting procurement almost into a consultative/coaching role.

Spreading the procurement mindset: Does procurement need to be just done by the procurement group? Just as the Quality movement in the 1990's ran into problems when the concept of quality was silo'd into a specific group in an organization (implicitly letting others off the hook), and how we are today seeing "voice of the customer" shift from specific groups to be more widespread organizationally, maybe a similar shift needs to happen for procurement. This could help the "procurement" group focus on more strategic issues rather than logistics of finding suppliers and arranging deals.

Thanks to Denali for inviting me to participate, and to the attendees for a lively and stimulating discussion.

AVP of Marketing Strategy Adam Richardson is the author of Innovation X: Why a Company’s Toughest Problems are its Greatest Advantage. His book is the manual for leaders looking for clarity about the emerging challenges facing their businesses. You can follow Adam on Twitter @richardsona.