Category: Procurement

Simplicity in Procurement

A reliable procurement system is designed for speed, efficiency and accuracy, and one of the best ways to achieve the intended design is to keep things simple. However, despite all precautions, problems ranging from human error to organizational shortcomings can still have a negative effect on procurement and purchasing ability, and the greatest issue plaguing procurement today is complexity.

The complexity in the procurement process is one of the main reasons why procurement has a diminished reputation today, as compared to previous years. The teams in the procurement community are aiming to help their business counterparts lessen and ease the pressure on their budgets, and making sure that standards like consistency and quality are upheld in their suppliers.

The huge problem is that no matter how hard procurement tries to ease the burden of companies, complexity is still a huge factor in the business. If procurement asks the company to use a specific software, or to fill out a form to make a purchase, that is an additional process that was not done before. In the old days, the mantra was: “Buy what is needed, when it is needed”. However, in today’s business, complexity in the procurement process is mounting, and the industry must work together to bring back simplicity as one of the core precepts for procurement.

The reasons to bring back simplicity in procurement:

1) Simplicity means speed

If the procurement team can prove to the stakeholders that working with them doesn’t slow things down, that can remove a huge amount of anxiety from the stakeholders. For stakeholders, the purchasing process shouldn’t be complex. Procurement may require intelligent solutions to manage suppliers and handle payments, but it should be kept as simple as possible. Simplicity in the procurement process frees up resources for value-adding activities, rather than consuming it.

2) Simplicity enables big ideas

In order to function better, procurement departments must understand their company’s concerns and be able to demonstrate how they measure up against these concerns. If the company’s requirement spans across different disciplines making it very complicated, the procurement department’s job must be to convert that complicated requirement into a simple one. Procurement must come up with simple ways and big ideas of measuring a requirement and then turning that into a strategy that takes the complexity away.

3) Simplicity means lean

No company needs to have thousands of suppliers. Procurement should learn to do more with less. The key to the future of procurement is deploying the most effective capabilities where they can make the most impact and automating everything else to keep operations lean and simple, without the unwanted complexity.

4) Simplicity is inevitable

The longer you spend creating a complex system, the more you consequently spend updating, rolling out and enforcing that system. Complexity breeds complexity and it’s only a matter of time until the complexity lessens efficiency and drives up costs immensely. Procurement is at its best when it can help stakeholders make a quick decision, rather than impose a lot of rules and forms that bogs the process down. The direction where procurement must go to achieve simplicity is stepping beyond the established automated purchasing setup and using data and expertise to enable strategic decision-making. This can be done with the help of sophisticated set of inputs and informed analysis that can help transform business complexity into a simple process.

Procurement Skills

It’s a common saying in the procurement industry: “What procurement heads want most from their staff is interpersonal skills”. But is this just an unhelpful cliché? To find out, Procurement Leaders recently launched the Leadership in Procurement report, a piece of research that projects what is expected of procurement leaders and the modern procurement function. In the report, strategic thinking, commercial awareness, and leadership skills came up as the biggest skills gaps that the procurement industry is facing today. These are not technical skills, but all soft interpersonal skills. In fact, according to many procurement professionals, the largest leadership skill gaps lie in being a visionary, the ability to build a team culture, communication, and openness to change.

It appears that the industry has been focusing too much on developing technical skills such as negotiation, spend analysis, and contract management, but have not invested enough in the people element of it. We often forget that a large portion of the procurement process lies in the ability to persuade, challenge, and influence for the better of the business. For that to be effective, procurement departments need to build confidence to communicate and engage with other parts of the business.

Procurement personnel need to take input and go out to the marketplace to sell their company and excite the suppliers. Procurement has to get ideas from the suppliers to sell back to their own marketing team – putting them in an internal consultancy and salesperson role, where Procurement personnel need to be dynamic and always up to date on the latest technologies.

With the new criteria needed for procurement skills shifting, below are the skill sets that Procurement personnel need to be very good at in order of priority:

1) Relationship Management

The ability to leverage interpersonal skills to establish rapport and develop relationships with all key stakeholders, suppliers, customers, & colleagues.

2) Negotiation Skills

The ability to persuade, influence, and explore positions and alternatives to reach outcomes that will gain acceptance of all parties and will also meet the organization’s strategic procurement objectives.

3) Professionalism

The ability to think carefully about the likely effects on others of words, actions, appearance, and mode of behavior. The consummate professional selects the words and actions most likely to have the desired effect on the group or individual in question.

4) Results Focused

The ability and drive for achieving and surpassing targets against internal or external standards of excellence. This is about showing a passion for improving the delivery of services with a commitment to continuous improvement in your procurement process.

5) Technology Aptitude

The ability to apply and improve in-depth specialized knowledge, skills, and judgment by assessing and translating information technology into responsive and effective procurement solutions.

6) Financial Acumen

The ability to apply a broad understanding of financial management principles and other quantitative information to ensure decisions are fiscally responsible and based on the procurement budget.

7) Strategic Industry Management

Establishing long-range business plans which can anticipate the global market. This is particularly important for commodity procurement.

8) Category Management

Categorizing the spending according to specific goods or services (direct and indirect) and keeping in mind quality, service, risk and cost.

9) Project Management

Driving the procurement process by designing, implementing and managing projects to a successful conclusion. Establishing accountability, establishing timelines and establishing goals are paramount.

10) Analytical Skills

The ability to articulate and solve both complex and uncomplicated problems and concepts and make decisions that make sense based on all available information. Particularly important in the selection of vendors.