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Within CPG companies, Marketing evolves everyday. Why doesn’t Procurement keep up?

By Andrew Rader |
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For most Consumer Packaged Goods (CPG) companies, marketing is a mission critical function and tends to be the gauge understanding brand health.  The same reason you know the names Nike, Clorox and Kleenex is the reason why marketing is king within CPG companies.  On the shelves, on TV and on the internet, it’s the core function that connects CPG products with customers.

Marketing is fast-paced and ever-changing.  To function, it requires a significant amount of services and materials to support creative, media, agency, event, public relations, point-of-sale and even packaging. In many CPG companies, procurement takes on the role of sourcing for these needs.

The challenge is, the marketing/procurement partnership isn’t working. The relationship can even – at times – be contentious. Here’s why:

  • Not delivering value | Rarely do you find a CPG company where procurement consistently engages, empowers and drives significant value to their marketing business partners and is seen as an enablement function. Too often, procurement is more focused on meeting savings, compliance and other financial metrics without considering the broader business applications.
  • Not listening | Procurement typically doesn’t fully understand marketing requirements and hasn’t invested enough time with marketing stakeholders to truly comprehend their needs. While procurement attempts to position themselves as a functional colleague, too many Marketing stakeholders feel Procurement doesn’t really understand what they need —- and how their requirements enables the broader marketing strategy.
  • Remaining tactical | Procurement takes a tactical approach and waits for formalized service agreements and statements of work to drop on their side of the fence before taking action. This tactical relationship is where value begins to erode and the relationship with procurement begins to falter.

There’s a better way

The stakes are high.  Big advertisers spend an estimated $30 Billion per year on goods and services.  Marketers require help to make the right choices about what to buy, how to buy and with whom they should partner.  These decisions have always considered cost, but lately, marketers are more focused on maximizing business impact. While marketers perform the ever-changing, complex and essential work for CPG companies, it’s imperative to have a dedicated and engaged procurement group to support them.  Moving away from pure cost analysis allows procurement to align with Marketing, and together, they can drive towards strategic goals while measuring performance along the way.

It’s time to talk

A conversation is the first step. Procurement should educate Marketing on the support it can provide and – in turn – must listen to what marketing requires to function better. Often the highest area of corporate spend (aside from direct materials), marketing needs a high-performing procurement team that can give fact-based analysis while maintaining sight on the strategic objectives. Whether it be managing suppliers, handling poor agency performance or analyzing data to deliver better ROI, procurement has an important role to play.  For example, three potential areas to increase procurement impact:

  1. Go beyond cost – Develop and measure detailed performance metrics against marketing’s stated goals
  2. Drive innovation –Engage early and often with marketing while priorities are still being formed
  3. Communicate and demonstrate value – share insights/opportunities based upon your unique marketplace perspective

Only when procurement focuses on providing exceptional support and value creation, will the imbalanced dynamic between marketing and procurement at CPG companies be solved.  Procurement must be an enablement engine for good — and be nimble enough to match marketing step-for-step in a very complex, fast-moving space. This means earning respect through valuable work which enables marketing to excel.

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