The Role of Procurement as a Strategic Advisory

Explore Procurement as a Strategic Advisory

PurchTips Edition #437

The Procurement Function is positioned in a unique place in modern supply chain dynamics. The reality is that if this critical department does not function effectively, today’s businesses will cease to meet customer requirements in a timely and cost-effective manner. Sadly, too many procurement departments are used solely for the tactical aspects of procurement. It is rare to witness procurement leaders sitting at the table where strategic decisions are made.

Procurement as a strategic-advisory

Imagine what will happen if procurement departments fail to consistently secure the critical raw material inputs, at the right price, on time, and in the right quantities. In many cases, the response to such shortfalls is reactive and primarily tactical, with short term thinking. The ability to put out short term fires in the process of acquiring raw materials and other inputs is seen as the major value of procurement, outside of saving money. This attitude contributes to the procurement function being viewed as second class or “necessary”

Highly trained Procurement Professionals can make a vital difference in the trending attitude towards their profession. The following are ways that procurement professionals can take a strategic advisory role:

1.) Expert understanding of Customer Requirements and Specifications: Organizations exist to create value for customers and stakeholders. Value is relative to the degree of conformance to customer requirements and specifications. The better procurement professionals are at understanding customer requirements, the better they can perform in an advisory capacity to all stakeholders.

2.) Expert understanding of Value and the dynamics of value creation processes:

Value has three components:

  1. There is a conversion or transformation of materials from one stage to the next
  2. All associated activities are done right the first time
  3. Customers are willing to pay for the output or resulting products and services.

Mastery of customer requirements and value as they relate to the procurement function equips procurement professionals with the proper acumen to act in an advisory capacity.

3.) Strategic Alignment: The ability to align the procurement function to the strategic objectives of our organizations is key in procurement acting in an advisory capacity to organizational stakeholders. It is essential that procurement professionals understand the political, socio-demographic, economic, technological, competitive, and industry trends that impact their organizations. This understanding enables procurement professionals to contribute and act in an advisory capacity.

4.) Commodity Advisory Team leverage: Forming commodity teams is the next step after points 1 to 3. Procurement professional should invite their suppliers, external customers, manufacturing, packaging, logistics, finance, and other key stakeholders to join commodity their teams. The objective is to align their procurement functions with all other functions by serving the interests of their associates and advising on how best these interests would be met. The alignment of customer requirements and key stakeholder interests is key. Matters of the quality, price, availability of procured materials are the focal points of these commodity teams.

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Copyright 2019. This article is the property of the Next Level Purchasing Association and may not be copied or republished in any form without the express written consent of the Next Level Purchasing Association. Click here to request republishing permission.

By David Millington, SPSM, SPSM2, SPSM3 - Director of Education (Next Level Purchasing Association)

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