Seasonal reflections on procurement

At this time of year, it’s good to reflect on how last year went and what lessons we can learn from it.

After a busy year with a range of clients, and working in a number of different environments, a few recurring themes stand out for the Future Purchasing team.

“Communication is at the heart of what we do”

Procurement feels like a technical skill but right at the heart of how we operate is the art of communication. Our stakeholders, many and varied, expect a simple service but actually need a far broader level of input to get the best value out of the supply chains we construct.

As a consequence, we need to spend time in the activities showing them what we want to do and how it will benefit the organisation. Of course, we have to get that value creation right, but in doing so we also have to spend time selling the story of that value creation. To do this well takes time, which is often sacrificed to seek more value. However, if that time is not spent, the message of best value and what it takes to secure it can be lost – and is lost more often than not.

The net consequence is that the stakeholders don’t buy in to the value message and so the implementation of that value is also lost. We have to spend time communicating in an effective and high quality way or we won’t deliver the value we promise.

Important vs. urgent

There is a day to day fight in all procurement operations: balancing the things we do which seem urgent against the things we do which are important. Many procurement operations fall into this urgency trap on which the important tasks are sacrificed. The reasons are many and varied, but mainly linked to needing to meet a requirement which wasn’t spotted until late on, thus requiring urgent attention.

However, the consequence is that we end up living in the responsive present, rather than reflecting on how the future should be, and then delivering less value than we could. There isn’t a magic solution for this, but just recognising the problem and thinking about how to address it would help us move forwards.

The real danger lies within those organisations which are so tuned to respond to the urgent that the behaviours it drives are rewarded (rather than taking time to avoid the problems in the first place). Observing this, it becomes clear that there has to be a way to step back and spend time with important issues, otherwise we can end up on a never ending treadmill of panicked response.

Taking time to distinguish what is important from what is urgent is a significant part of being effective; engaging in conversation about that balance is even more important.

It is hard to do everything

The other side of the ‘important vs. urgent’ coin is the impact of trying to do everything. Many procurement organisations show a lot of stress and challenge, as the pressures of attempting to deal with both the urgent and the important come to bear.

Examples of procurement juggling contradictory goals which can be mutually exclusive are everywhere, not least when simple price reduction is believed to be the only possible measure of procurement effectiveness. Some days, just having something at all is a victory, rather than having it cheap. The challenge often links back to effective communication of what is important, although that suggests we’ve had time to identify what is important.

Where we’re being challenged by the need to do everything, having ways of exploring the issues, distinguishing tasks and linking them to important outcomes, and having meaningful dialogue with the business about that balance, becomes increasingly important.

We are one organisation

The internal fights that go on within organisations over departmental priorities often lose sight of the reality; procurement is an integral part of the organisation it works within and all departments should be working together for the benefit of the organisation. The challenge of finding a balance between all the various parties involved in supply chain decisions is a very real one.

High quality category management activity allows us to discern between the different elements of requirement in the organisation, and challenges us to find a path through those requirements to create further value. Retaining the idea that we need to find the organisational view of what is needed is critical in both category management and within negotiation development.

One of the key features of negotiation is the underlying question, as a negotiator, of ‘who am I representing’? Many procurement negotiators seem to start with the concept that they have to represent procurement in the negotiation, which implies that there is, somewhere, another negotiator who is taking the broad view of the entire negotiation; on specifications, legal requirements, pricing, terms, access to services. However, that is generally not the case.

We know when it’s going wrong: a stakeholder tells us that they have informed the supplier that they have the work, and could we just negotiate the price. Or, a whole set of outcomes has been negotiated, and now it goes to legal to renegotiate it all. Far better if we can find and hold onto a one organisation approach; working for the best value, all together. Unsurprisingly, this requires excellent communications as well.

Suppliers have requirements too

A last observation is that within the development of strategies and negotiations is the challenge of recognising that the other parties have needs as well. It isn’t a one-sided provision of an outcome, it is actually a joint effort between both sides to keep a supply chain working. If we neglect the needs of the other side, we are less likely to get the outcomes which we are expecting.

Of course, there are plenty of examples where a buying organisation has leveraged a position of great advantage to itself, and no benefit to the supplier, besides, perhaps, some rolling cashflow. However, many of those relationships end with challenges in service and quality, or access to technology, or some other item that was unknowingly traded away in the single-minded pursuit of an individual goal.

This isn’t to say we need to roll over. The outcome still needs to be appropriate, but having an eye to the needs of the other side may deliver more value than ignoring that aspect.

If we can hold these issues in sight, then we will be more effective. And that seems a good place to aim for at any time of year.

Further reading

Blog post: A practical supplier management programme – Three key building blocks

Blog post: A negotiation fundamental – Understanding the suppliers interests