Company competitiveness has become increasingly linked to the performance (and proper management too) of their extended supply network. In such context of business / corporate virtualization (meaning increasing externalization of the different activities of a company) , Procurement has gained more attention from the top management.
- From understanding to analyzing our environment, impacts and business imperatives
- From talking to defining the Procurement Value Contribution for the company and select the appropriate future Procurement operating model
- From implementing to truly benefiting from compliant, efficient, and friendly user Processes, Systems and tools (incl. analytics)
- From organizing our resources to properly outsourcing our Proc. activities
- From complying to driving the Sustainability agenda
- From SRM to Global Account Management Program
- From being reactive and uncoordinated to acting proactively, in an interconnected and immediate manner.
Let’s start with the 1st main topic: the macro photo (environment, impacts and corresponding business imperatives).
World and business are constantly evolving and changing so are the strategic, financial, logistic, sales or marketing priorities of the company. Procurement professionals should permanently analyze what is happening outside and inside the business in order to be able to accurately define and generate the right outputs for their organization.
It’s all about a robust analysis of our sector/industry, without forgetting to evaluate corresponding business impacts, allowing us to recognize current and future business imperatives that will grant the competitiveness of the company.
For example, PEST (Political, Economic, Socio-cultural and Technology) analysis is not new; over the years, it has been fine-tuned by adding new pillars like Legal, Environment, Ethics. We could use any other more modern or more dynamic analysis tool. It is just so important for Procurement to spend time to properly perform such sector / industry investigation, and for sure, followed by a “So What?” analysis. And I do believe that we are not good enough at it as we generally tend to remain too Procurement self-centered. A good "PESTLEE" analysis (or any other name) is not too difficult to complete: we should just ask the business or look for all the free reports from the consulting firms available in Internet. Once you have a starting point, the challenge is to regularly update it as change is the only constant parameter.
That’s for the world and the industry we work in. It is about knowing what is impacting every day for good or for bad our business; it‘s about investigating the risks and opportunities out there.
More important is to analyze how the business is reacting and how business imperatives are shifting. Procurement should learn to make a permanent VoC (Voice of the (internal) Customer or why not call it a "Voice of the Company").
In a very simple way, to sustain wealth creation, companies have 3 options:
In a very simple way, to sustain wealth creation, companies have 3 options:
- Being more productive and efficient
- Increasing sales meaning in many cases 1.- internationalization, globalization and 2.- new marketing strategies and tactics (focusing for example on customer experience, digital marketing, MIM_massively individualized marketing, etc…)
- Being innovative: new products, new services as well as faster time and speed to market. In addition, for many traditional companies, this often includes a radical conversion of their core business by moving from basic product delivery to offering a wider (or completely new) service provision.
Considering those 3 options, it is obvious that the extended enterprise supply network has become a major contributor to company wealth creation (after all, for some companies, up to 80% of their costs, and most of their impacts, opportunities and risks lie upstream).
As Procurement professionals, the true questions we should ask ourselves are:
- From a pure business point of view, what are the key trends in our respective industry or sector?
- Where are the key risks, opportunities, impacts for our organization? Today? And tomorrow?
- What are / will be the corresponding company strategy and priorities?
Do you consider that analyzing environment, impacts and business imperatives is a good usage of our limited time? Do you agree that it should be the first mandatory task for any Procurement professional?
In my next post, I will spend some time to reflect on Procurement Value Contribution as second field for a more scientific procurement function. I invite you to stay connected and contribute.
