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Linking procurement to business strategy – the path to success in 2020
By Mark Hubbard |
In the 2020 Global Category Management Report, the most significant factor in driving procurement performance was ensuring a link between organisational strategy and category management delivery.
This is unsurprising at one level, but also deeply affirmative of some real areas of importance for procurement teams to think clearly about.
Link with corporate strategy
Procurement doesn’t buy much for itself: a few laptops, some training, office space, pens and access to some good quality software. We spend most of our time working out the best approach for the business to buy a whole load of things it needs to operate effectively and efficiently. A core part of that is understanding the core business objectives, and to focus on how the supply chains can deliver outcomes which reinforce the delivery of those corporate objectives.
There are issues within this, of course. It assumes that the corporate strategy is actually being enacted as it is described. It might not be, for a couple of reasons. Firstly, there may be external pressures which are forcing the business to adapt its strategy to suit prevailing conditions. Secondly, it might not be used by the executive in the way one might hope for. In either case, the procurement organisation needs to right on top of what the actual strategy is and make sure that we are delivering to that.
Further, there may be a reality that the market pressures which procurement can observe should be driving strategy in a slightly different direction. As such, it may be appropriate for procurement to engage to help frame and adjust the overall corporate approach. This may happen if there is a dramatic change in a part of the supply chain which is fundamental to our overall strategy.
This suggests that we need to maintain a critical level of awareness of the business strategy and how it may need to alter.
Avoiding internal conflict and the importance of measurement
This may trigger another issue, however. It is entirely possible that other parts of the business are not operating with a laser-like focus on the delivery of corporate strategy. This may well bring about conflict internally, if the approaches developed by procurement clash with the requirements or direction stakeholders have. It may be necessary for procurement to base approaches on corporate strategy and engage with the business to understand how everything links together.
There is also a link here to measurement. Where strategy delivery becomes a focus, it should be possible to link to KPIs which reflect the overall delivery of strategy, and to show how procurement-led programs are increasing the speed of delivery of those objectives.
Seeing the links
To do all this, we are likely to need someone who has time to spend on the corporate strategy and the implications of it, and the areas of focus for strategy within the business.
Although there is an underlying danger of assuming that the quality of our corporate strategy is all it needs to be, it is a far better approach to get the linkages and consequences right, rather than missing it out entirely.
As an example, the business strategy of International Airlines Group suggests a number of areas which are useful to procurement. Under efficiency and innovation, we can find “Engage in Group-wide innovation and digital mindset to enhance productivity and best serve our customers”. This suggests (when read with a number of other statements in the strategy) that working across the group to address innovation opportunities is a core part of the business. It is possible to take that element and look into the supply chain for opportunities based around innovation and digital mindset for productivity as a specific focus, which will tend to drive particular approaches within linked category strategies.
Want to know more? Download our Global Category Managers report summary and request the full report here.
Further reading
Blog post: 10 years of world leading actionable category management research
About Mark Hubbard
Director
30+ years experience in procurement and supplier management, in line and consulting roles
Previous employment: Positive Purchasing Ltd, SITA,
QP Group, BMW, SWWS, Rover
Education: BSc in Engineering Metallurgy, MBA University of Plymouth
CIPS: Member
