I hope that you have enjoyed the article, “How To Create Procurement Reports, Part II.”
One of the eight items I recommended including on your procurement reports was Value Creation Efforts. Value Creation Efforts is one of those things that you mention in a procurement meeting and everyone nods like they know what you’re talking about as they think to themselves, “What the heck does he mean by value creation efforts?”
Well, let me give you some examples to help.
First, let me say that I feel that any activity that contributes to the improved financial performance of an organization to be a value creating activity. That includes saving money by doing traditional things like negotiating.
But, when “value” is discussed in procurement, something more than old-school cost savings is implied. Creating value is often thought to be more along the lines of boosting revenue.
So, how can procurement boost revenue?
Here are a few examples:
- Getting better quality performance from the supply base so that the organization’s products are of higher quality and, therefore, more attractive to prospective customers
- Getting more reliable delivery or better stocking programs in place with suppliers so that products are available to customers exactly when they are needed
- Coordinating a joint development project with a supplier where a new, exclusive innovation will give your organization’s product an advantage that no other competitor has
There could be countless examples. The ways you can create value are limited only by your imagination.
So, the next time “Value Creation Efforts” are brought up in a procurement meeting, offer to share a real world example of how you created value. They may not say it out loud, but the rest of the people in the meeting will appreciate the clarity that your example brings.
To Your Career Success,
Charles Dominick, SPSM, SPSM2
President & Chief Procurement Officer – Next Level Purchasing Association
Author – The Procurement Game Plan
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