2021: The Year of Bringing Buying To the Board Room
This article was originally published in the Sourcing Industry Group (SIG) Speaks Blog – 12/10/20, featuring LogicSource Managing Partner, Sam Vail.
It is hard to believe 2021 is at our doorstep, and while the immediate future is uncertain, the mid-to long-range outlook is virtually unknown. What we thought would be a ‘two-week’ work-from-home in March, has turned into a full-blown pandemic, and with it, the uncertainty surrounding it. Now, with a new wave of COVID-19 outbreaks breathing down our necks, tough times are here again.
As procurement professionals, we are, by nature, resilient. The toughest of times takes the strongest leadership and most innovative strategies. The pandemic and the consequences of it provided a proving ground for the often-overlooked sourcing and procurement team. Over the past year, sourcing and procurement became the lynchpin for many organizations’ survival, securing critical business and PPE-related goods and services to keep businesses afloat and employees protected. Throughout, procurement professionals were working tirelessly to create innovative cost savings and expense reduction opportunities when other departments went right to cutting staff and payroll.
At a time when the needs of the business are buoyed through critical sourcing and procurement activities, there is, perhaps, no more important function to a business…
Unfortunately, not everybody realizes that. Many business stakeholders still think of sourcing and procurement as tactical purchasing and contract administrators, or bottlenecks that create delays in the buying process and upset suppliers. In reality, sourcing and procurement is really about negotiating critical multi-million-dollar contracts and finding the right supply chain partners to mitigate the significant risk in today’s market. Critical, not just in savings, but in the essential value and impact you have on the business.
In other words, a high performing sourcing and procurement organization should be seen as a major advantage—with a seat at the table for the decisions that concern top-line growth as well as bottom-line profit improvement. That said, in a recent Ardent Partners’ study—Procurement Metrics that Matter in 2020—stated that as we head into 2021, 90% of CPOs still see room for immediate sourcing and procurement team performance improvement. What worked well in the past will not be enough to succeed in the years ahead. This means we, as procurement professionals, must take new, bold steps if we are to maintain the momentum built over the past nine months. Otherwise, we risk reverting back to our legacy roles.
Now is the time for sourcing and procurement teams to elevate their impact and visibility as true partners to business leaders and bring buying to the board room.
So, how do you get there?
Over the past decade, as sourcing and procurement leaders mapped out their key initiatives, they would look to software to support their goals and objectives (i.e. tighter spend management, increase the percentage of spend that has been sourced/addressed, increase the percentage of suppliers under contracts). And yet, history has shown that approach has been a long, resource-heavy, and expensive investment that typically resulted in an unacceptable ROI. The days of complicated implementations, source-to-pay modules that don’t talk to each other, and resource-intensive toolsets that required significant change management efforts for adoption are no longer acceptable.
Another alternative procurement leaders considered was to hire a consulting firm that “specializes” in sourcing and procurement. Time and time again, these consulting engagements ultimately resulted in an expensive PowerPoint with across-the-board bad grades for the current state of operations. And while they supplied big savings numbers, they didn’t provide any of the execution support required to help existing teams deliver against those promises. We hear the same story over and over again, that these consulting engagements were a waste of time, and their often over-inflated view of the savings opportunity (because consultants actually don’t buy anything) caused disappointment when the existing teams were challenged to deliver against those targets.
Fortunately for today’s sourcing and procurement teams, the cost of enabling technology, market intelligence, and supporting services is dramatically lower, while the ease of implementation and adoption is significantly higher. The convergence of these offerings provides a new opportunity for sourcing and procurement teams struggling to prove their ROI. Better data visibility can be gained from enhanced analytic capabilities, made possible with new or improved technology, supported by more experienced and technically capable resources, and empowered with superior market intelligence. When viewed this way, a straightforward formula for CPOs and their teams to enhance their performance and drive greater enterprise value emerges.
It’s time to change the game for sourcing and procurement, from a cost center to a source of strategic advantage. It’s time to aim higher, take the lead, and bring buying to the board room.
About LogicSource:
LogicSource is purpose-built to drive profit improvement through better buying. LogicSource focuses exclusively on the sourcing and procurement of goods and services not-for-resale, which typically represents 20% of a company’s revenue and the area of greatest spending inefficiency. Tested time and again in the marketplace, their proven engagement model builds profitable partnerships that achieve 4-15x ROI.