Part 3:

Unlocking the potential in procurement

 

A procurement-shaped hole

All the challenges described – understanding the problem, operationalizing, gathering data insight, defining and delivering value, and obtaining the skills to deliver – need business-wide drive and collaboration to achieve. But, in each case, Procurement is either a key enabler of change or the driver of the change: Procurement is the solution CEOs are looking for, hidden in plain sight.

Through the lens of a simplified sales process, Procurement needs to:

  1. Articulate its value – what is a reasonable opportunity from action or cost of inaction?
  2. Establish credibility – be honest and realistic about resources, timelines, and obstacles.
  3. Deliver results – reinforce progress with quick wins and measurable results.

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Articulating value

As identified in Figure 8, Procurement Professionals are most likely to recognise the remit of their role as meeting its more traditional demands such as negotiating and executing contracts, delivering cost savings, and sourcing (72%). This is followed by building supply chain resilience (59%). Comparatively fewer Procurement Professionals feel it is within their remit to ensure the social sustainability of the supply chain (42%), ensure good governance within the supply chain (41%,) or ensure environmental sustainability of the supply chain (38%). 

This perception clearly needs to change if Procurement is to position itself to lead supply chain sustainability and attract the investments it will likely need.

Interestingly, expectations of the procurement function are less varied among Business Leaders, with only  50% referencing negotiation, executing contracts, delivering cost savings and sourcing against a 49% and 41% for Supply Chain Governance and Environmental Sustainability respectively.

It appears to be the CPO, however, who is most ambitious with the role they can play in ESG and wider strategic initiatives. There is a significant difference between the perceptions of CPOs compared to the average among all Procurement Professionals when it comes to defining the remit of Procurement. CPOs see a wider-scale role for their teams, compared to those in less senior positions. As seen in figure 11b, 69% of CPOs see the remit of their procurement function as ensuring good governance within the supply chain, compared to an average of 41% among all Procurement Professionals. Additionally, 67% of CPOs see the remit of their procurement function as ensuring social sustainability in the supply chain, compared to an average of 42% among all Procurement Professionals. 

CPOs are more visionary and ambitious.

In many organisations, the CPO will ultimately be the bridge between strategy and execution. Traditionally, the CPO has been front and centre of cost optimisation activities – but CPOs who have proven their ability to deliver these cost requirements can start to look beyond this mandate and focus on the strategic value-add that they can deliver within their organisation by contributing to E, S, and G efforts. In doing so, they will also need to lead their prospective teams through a process of culture and mindset change. 

CPOs must continue to market themselves internally, be fully visible and accessible to the board. In turn, they will have increased opportunity to chair conversations with their management team to firmly articulate the value that Procurement can bring to the organisation. Ultimately, articulating value comes down to developing the right relationships and seizing the moment to tell the story of Procurement.

Q. What is the remit of the procurement function at your organisation?

(Procurement Professionals)

FIGURE 12:
There is a significant perceptions gap between CPOs and other Procurement Professionals when considering the remit of procurement

Credibility’s role

Credibility comes from a track record of success and the ability to foresee and express issues and constraints, whilst having the confidence to overcome these challenges.

Henrik Nilsen, Head of Procurement Excellence at Topdanmark, discusses his journey to elevate Procurement but recognises the need to operate cross-functionally. 

Expert View:
Henrik Nilsen
Head of Procurement Excellence
Topdanmark

"PROCUREMENT WAS NOT ON THE AGENDA WHEN WE STARTED THIS TRANSFORMATION JOURNEY TO CENTRALIZE THE UNIT. TODAY, IT IS ONE OF THE ORGANIZATION’S KEY STRATEGIC PILLARS."

Topdanmark is a leading insurance company based in Denmark. With more than 14 years of experience in procurement, Henrik Nilsen shares his perspective on the importance of Procurement to achieve strategic goals and predicts that ESG will continue to take up more space on the boardroom agenda.

READ ON IN PART 4:
A roadmap for sustainable procurement

Our 10 steps to sustainable procurement summarise our recommended approach, based on ESG work we’ve done both internally and with our clients.

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