Subscribe to the blog

Get the latest Procurement insights from our experts

Aligning procurement strategy with the business strategy

by | March 19, 2019

Procurement has become a key enabler in the generation of incremental profits and is now  becoming the custodian of third party risk awareness and risk mitigation. This trend has been an evolving journey for over 50 years. In particular, looking back at the statistics post 2008 when the world experienced the global financial crash, organisations have stepped up their levels of focus. They have identified the need for strategic partnerships and the necessity to embark on a transformational journey. The backdrop on which business technology platforms sit is evolving every day with pay on demand and subscription-based models become more common, the legacy ‘on-site technology’ era is diminishing. In today’s world, innovative companies are using cutting-edge Software as a Service (SAAS) solutions to scale up their P2P processes with speed and agility. Moving your data into the cloud and utilising the readily available modern features are supposed to improve overall productivity, reporting, tracking sales, goods and assets as well as furthering internal and external communication and visibility. In all industries, executives are starting to be aware of the power of procurement. They ask and expect their procurement department to achieve cost reduction, provide greater communication and collaboration between the businesses needs and suppliers whilst implementing successful new product innovations. Change needs to happen from top management down to the newest intern. Your business community needs to be informed, reassured and engaged. Stakeholders need to hear a clear and consistent message from the procurement function, one that will ultimately help them achieve their objectives and profit.

Processes

There are three key processes that need to be defined and embedded within the business:
  1. Source – strategic sourcing and category management
  2.  Manage – ongoing management of external spend, suppliers, contracts and stakeholders
  3. Transact – transactional purchase to pay (P2P)
Typically, P2P will be owned by finance and the other processes by procurement. If this is the case, best practice suggests a common owner sitting across these 2 departments, or at least very careful collaboration between the parties. The procurement function must fully support the overall corporate goals in order to become a strategic differentiator because of the way it can deliver benefits. P2P is an enabler that even allows decentralised companies to behave in a centralised way through application of a common set of processes, rules and policies. It is also important to note that through P2P, procurement becomes much more inextricably linked to accounts payable/finance – whatever is done well up front by procurement has a huge impact on transactional efficiencies further down the line – therefore it is important to build the skills and competencies with people that are able to understand the full end to end process. Procurement has the chance to be a ‘key player’ in achieving overall cost reduction. A part of the procurement strategy should always be to focus on strategic sourcing whilst utilising best in breed procurement systems. Procurement’s success will ultimately depend on its ability to engage with its stakeholders. So, in order to understand how it is perceived, procurement function must go out and ask its suppliers, sponsors and internal business users what their view of the procurement function is. The results are almost always different to what is expected. Read more on the topic in our whitepaper A framework for successful procurement.