You may already know how to work with multiple vendors, evaluate the pros and cons of each, and negotiate the best deals for the company. Do you also know how to use technology to drive business value? Can you handle added responsibilities without adding staff?
The Ugly Truth about PurchasingAlready under pressure to find more savings, procurement managers face the everyday tasks of delivering more results and being more effective. Typically, this must happen without the benefit of increased budget or additional staff. That means CPOs have to rely on their current team, and from our research, it seems they don’t have much faith in that team. An Ardent Partners survey of 218 CPOs around the world found 76 percent of those CPOs felt the skills of their purchasing staff either ‘needed improvement’ or displayed a ‘significant gap.’ Reflecting on the findings of Ardent Partners’ annual CPO Rising report, Andrew Bartolini writes, “The biggest challenge for Chief Procurement Officers…is staff or talent. [At least] 57 percent of CPOs believe that flat headcount, stagnant skills capabilities, and/or greater staff responsibility represent their greatest challenge in 2014 and beyond. Procurement’s convergence within the enterprise and the persistent need to do deliver more value compound these challenges.” Why do these CPOs feel these skills are stagnant? What do they expect? Some managers feel a purchasing department should have the following high-level skills:
- contract management
- category management
- data analysis
- presentation expertise
- managing supplier performance
- managing supplier risk
- supply market knowledge
- know how to use technology to drive business value
- cash management
- business consulting skills
The Reason Your Procurement Efforts Are Going NowhereLimited resources are one of the root causes of overburdened procurement staff. It’s time for a change. The current trend of adding responsibilities without adding staff is also known as “doing more with same.” It is clear that purchasing managers need to do something to address the situation, but what can they do? How can CPOs help augment critical skill areas? It is easy to suggest leveraging the best practices of supply management to propel your organization to world-class status, but that ignores the practical aspect of how exactly to fill gaps in the skills of your organization’s supply professionals–and their colleagues in management. The fact is, there are a few ways organizations with limited resources can adopt people-focused strategies that will improve bottom line results.
How Best-in-Class Firms Add Value without Increasing HeadcountIf you can’t hire more staff, what are your options? According to Ardent Partners’ Managing Partner & Chief Research Officer, Andrew Bartolini, training and staff development is your best bet. “With companies still reluctant to significantly increase the size of procurement teams, CPOs are best served by investing in the staff they currently have and enabling them to do better with same. We’re already seeing this play out in the CPOs’ strategies for 2014, as 45% and 32% of CPOs want to get more out of the technology solutions and business processes they currently have, respectively. After all, adopting efficient business processes or robust technology solutions have limited impact if the staff doesn’t know how to implement or leverage them. So, instead of battling for big ticket budget item approvals, many CPOs have focused on investing in training program and ensuring that their staff are fluent with existing technology solutions and business processes – optimizing what’s already in place.” What do leading organizations do to improve procurement people and processes?
- Increase business skills training
- Increase software/technology training
- Improve category management skills
- Improve supplier relationship management skills
- Ensures that procurement policies and procedures are followed
- Increases communication/collaboration between stakeholders (CPO and the CFO, the accounts payable team, line-of-business budget holders, product development and management teams, suppliers, etc.)
- Cuts down maverick spend
- Drives high adoption of technology
What about the rest of the company?You may be asking, “Once I develop my staff’s capabilities, how can I get everyone in the organization thinking that way?” Here are a few suggestions:
- Connect procurement goals to business goals. Get everyone one the same page by tying procurement goals to overall business goals and communicating this to all stakeholders.
- Invest in more/better training and better hiring practices. Attracting and retaining the right people will give your organization a sustainable competitive advantage.
- Increase/improve marketing of procurement successes. The only way non-procurement staff will buy-in to procurement initiatives is if you present your programs, systems, and processes into a larger business context. Help them see “the big picture” and how this will help them do their jobs better.