Procurement Strategy Do's & Don'ts, Part I
PurchTips edition #249
How Are Good Procurement Strategy Decisions Made?
When implementing or refining a procurement strategy, the decisions you make early on determine whether that strategy will succeed or fail. In this edition of PurchTips, you'll learn five sets of "do's" and "don'ts" that will help you make the right decisions. A future edition will share three more sets of do's and don'ts.
DON'T think you know everything. DO seek to learn what you don't know. Every organization has not-so-obvious opportunities for Procurement to add value. Search for these opportunities with an open mind and they will present themselves for further evaluation.
DON'T randomly try to save money. DO strategically select areas for cost reduction. "The key way to do this is really partnering with your finance staff, partnering with your CFO," says Ravi Thakur, Vice President of Services & Support for Coupa, a leading provider of cloud spend management solutions. "It's working with them to understand what metrics drive their business such that you can go ahead and work with them to cut cost where it matters."
DON'T "wing" a procurement strategy. DO base a procurement strategy on a business case with a clear return on investment (ROI). When executives review budget requests, they will ask "Are you going to create a business plan for me that's going to create revenue or cut costs?" according to Thakur. ROI is "the only reason people will invest in a strategy, a process, or software, [so] make the business case for hard dollar savings."
DON'T assume that Procurement is prepared for a new strategy. DO prepare procurement employees for new roles. Communication and training are mandatory if different results are expected.
DON'T believe that your leadership is enough to drive change. DO get buy-in for your procurement transformation from senior management. "Make sure that the executive team is engaged" in procurement change management, advises Thakur. "Unless you get the buy-in from the CFO or CEO in order to go out and proactively talk about that change and make it a key initiative for the organization, it's very difficult to get [internal customers] to go and follow a transformation."
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