Procurement and value managed: Getting supply chain management right

“Procurement and value managed” was voted as the Number 9 for Sales Trends for 2011. In 2011 we are seeing the development, thinking and sophistication of the procurement profession accelerate. This progression will surely see procurement on the front foot of supply chain management.

Around 60% of major global corporations now have procurement and supply at the executive table alongside sales, marketing, finance, production, HR, IT, etc. Security of supply, environmental credentials, sustainable business practices, integrative processes and businesses cases will be up for discussion at the executive level and procurement are right in the centre of key decision-making. Smart procurement professionals will centre much of their thinking and advice around value management rather than cost management.

Contrary to popular myth that all procurement people want to negotiate the lowest price, the procurement profession is presenting itself as far more sophisticated than most sales people give it credit for.

Recently I had the opportunity to attend and present at the CIPSA CPO100 conference where the top 100 Australian companies were represented by their Chief Procurement Officers. The insights and findings were fascinating – a significant feature being the growing importance of having viable relationships with internal stakeholders, sales people, suppliers and customers. The procurement profession recognises that in the past, its members haven’t done the best job in building and managing viable business relationships within their own organisations or with suppliers, admitting that the end-user customer could even be forgotten.

But things are quickly changing – smart procurement professionals now recognise they need to look at the whole supply chain process. They need to have a firm grasp of the organisation’s strategy, culture and capability as well as an understanding of the intricacies of the changing needs of their customer base and their buying behaviours.

In this volatile world, it is well recognised that customers no longer buy vertically and now buy horizontally, subsequently creating havoc in traditional supply chains.  For instance ‘Zara*’ one of the latest fashion brands to hit our shores has a three week turnaround on new range promotions. This means that new product materials need to be sourced, made and shipped to store within 15 days.  This means 16 new ranges per year.  This has turned supplier relationships, procurement practices and the retail fashion business on their heads.

How does procurement respond in this instance?  According to Supply Chain Management expert Dr John Gattorna they make sure they fully understand the business, its strategic priorities, its customers’ buying habits, internal stakeholders and suppliers’ capabilities.  He states that sole focus on cost management will not work in this case and says that effective supply chain management is all about understanding the behavioural profiles of your customers, internal key stakeholders all the way through to your suppliers. Aligning your behavioural preferences along with your strategic intent and cultural values will get much better outcomes for all concerned.

Procurement realises that multi-disciplinary work clusters within organisations rather than silos proves more effective. This means that people actually get to talk to each other and really connect about projects, production, supply and successful outcomes in the field.

Procurement professionals admit there is still some way to go as far as the reputation and actual capabilities of their profession.  They know they need to reposition and rebrand procurement as a strategic partner offering ‘value’, as suppliers also need to.  Many procurement professionals are fast realising they need to adopt the same skills they value in highly effective sales people or account managers.

The irony is that often the professions of procurement and selling have been pitted against each other when they have all the while really been trying to achieve the same thing – bring value to their clients and/or stakeholders.

Rather than work against each other smart procurement and sales professionals work together each understanding their goals and objectives and where they can find common ground and viable business relationships. Smart procurement and sales professionals are business people looking for viable solutions that serve the end user – the customer, as well as the businesses of both client company and supplier.

This is why I’m building bridges between the two professions. I have invited Craig Rooney, Group Procurement Manager for Porter Davis Homes and former Coles Group Procurement Manager to discuss what 21st century procurement professionals are looking for from sales people that’s beyond the price discussion at the CSE11 Sales leadership conference. This will be the first time a procurement professional has presented to the sales profession in Australia. As I have been given the opportunity to speak at CIPSA conferences on several occasions I thought it would be good to hear from procurement.

So the sales profession could do itself a favour and pay attention to these changes and ditch the “us versus them” scenario when it comes to dealing with procurement. 2011 and beyond is about working with procurement to build viable relationships manage real value.

*It should be noted that Zara has come under scrutiny for breeches of working conditions as it has been accused of using slave labour in Brazil. Their procurement practices are currently under investigation.

Sue Barrett practices as a coach, advisor, speaker, facilitator, consultant and writer and works across all market segments with her skilful team at BARRETT. Sue and her team take the guess work out of selling and help people from many different careers become aware of their sales capabilities and enable them to take the steps to becoming effective and productive when it comes to selling, sales coaching or sales leadership.To hone your sales skills or learn how to sell go to www.barrett.com.au.