Investing in procurement skills and systems can produce “remarkable” results for businesses, say consultants Efficio.
In its latest Viewpoint article Efficio Vice President James Jenkinson and Manager Chiara Riffaldi say it is crucial for procurement professionals to forge effective relationships not only with external suppliers but also with colleagues in their own organisations.
This may be held back, however, by a lack of investment made in the people concerned and the systems they use.
The Viewpoint, Engaging procurement’s stakeholders: why is it so difficult?, says procurement has generally developed beyond its roots as a purely administrative function, yet in some organisations it is still seen as less important than finance, sales or marketing.
“Historically there is also often little investment in the systems procurement requires to achieve maximum effectiveness. Processes and policies are outdated and do not reflect current needs.
“The best organisations understand the direct link between procurement and business success. The case needs to be made more strongly to those who still don’t appreciate this relationship and the need for investment in a key function.”
Jenkinson and Riffaldi say the lack of investment means procurement is sometimes not given the place it deserves within organisations and this creates a vicious circle: “the lack of authority means the CPO cannot effectively carry out the initiatives needed to create success, and in turn the lack of success contributes to the lack of the CPO’s authority.”
However, the vicious circle can be broken. “it is a question of changing the perception of procurement. Many people don’t understand the potential role and value procurement can offer if it is given the resources to do the job. Once this happens, procurement’s reputation can improve almost overnight.”
Jenkinson and Riffaldi say business leaders can take steps to radically improve procurement’s effectiveness and help it achieve strong relationships across the organisation and beyond. These include ensuring that procurement is responsible for all sourcing activities, providing the necessary resources, simplifying processes and ensuring that the right talent can be attracted.
The Viewpoint concludes: “It is clear that with a properly thought-out change strategy, a modest investment can produce remarkable results.
“In today’s competitive business world, and with economic growth likely to be limited for the foreseeable future, the investment is likely to be extremely cost-effective.”