What Is Procurement’s “Trump Card?”
What Is An Oft-Ignored Procurement Contribution?
PurchTips Edition #367
Fear not, the use of the word “trump” in this article’s title has nothing to do with the president-elect of the USA. The term “trump card” refers to something with the potential to give someone a surprising, dramatic and persuasive advantage.
In terms of communicating value to senior management, do you know what procurement’s trump card is? Many would say it is cost savings. But cost savings is a well-documented – and expected – procurement contribution.
I would argue that procurement’s trump card is contribution to market share growth. Market share refers to your organization’s sales as a percentage of all sales in the industry. Though cost savings is certainly a priority of executives in mature and declining organizations in stagnant economic times, market share growth is among the highest of priorities of executives in newer and growing organizations.
To understand how procurement can contribute to market share growth, think about why your organization’s customers buy from it rather than a competitor. Also, think about why others in the industry instead buy from competitors
If they buy based on speed of availability, identify how you can get products and services from the supply base earlier to support faster fulfillment of your organization’s orders. If they buy based on quality, identify how you can get higher quality inputs from the supply base so that your organization can provide higher quality outputs to its customers. If they buy based on innovativeness, identify ways to collect, vet and implement innovative ideas from the supply base.
If procurement helps make the organization and its products and services more attractive to current and prospective customers, the strategic value to the organization could exceed that of cost savings. Market share, revenue, and profitability will all increase. That’s powerful potential. And that is why market share growth is procurement’s trump card.
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Copyright 2017. 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 Charles Dominick, SPSM, SPSM2, SPSM3
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