Do you know how to do more with less? Procurement and sourcing professionals who want to generate value and realize savings for their organizations have their work cut out for them, but it is possible to do it all. You see, getting everyone in the company to think like a chief procurement officer (CPO) will have a direct impact on your organization's bottom line. Imagine increasing compliance, reducing risk, and realizing cost savings. You can get started by practicing our tips for how to build a "procurement mentality" in staff.
The Ugly Truth about Purchasing
Already 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
It can be tough to build a team that has all these skills (and keeps them up-to-date) in today's rapidly changing business landscape. As difficult as it may be, sourcing and procurement teams that want to maximize the value they can drive through their sourcing efforts need these skills to succeed.
The Reason Your Procurement Efforts Are Going Nowhere
Limited 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 Headcount
If 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
Bartolini says, "CPOs must take more deliberate steps to improve the department's capabilities – taking full ownership of staff recruiting/hiring would be a great first step; taking a 365-day programmatic approach to improving every staffer's skills would be another. It is difficult to pull already limited resources away from the job at hand and allow time for training, but it is an investment that must be made."
With a little effort, you can transform your entire organization to a lean and mean supply management machine. Of course, you'll have to start with the sourcing and procurement team, but the same strategies can be used across the organization. Here are a few of the benefits of investing in training:
- 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
Aren't these all signposts on the road to business success?
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.
Speaking of seeing the big picture, supply management experts, Ardent Partners suggest procurement and sourcing professionals “connect the dots across their strategic sourcing programs. They can do this by linking processes and tools to work in harmony; by looping in all relevant stakeholders – internal and external – into the process; and by measuring a variety of metrics.”
Now is the time to start implementing some real cost savings. So, rein in expenses and get back in control. Look at your current training offerings and come up with a few fresh ways to improve your team's skills.
Do you feel your team has the necessary skills to handle your current procurement challenges? Join the conversation by tweeting us @BeelineVMS.