When discussing the role of procurement in a firm, it is very important to understand that the procurement will only function optimally when the firm understands its value proposition, and that they understand when it is the right time to bring a procurement team onto a project. The internal customers and the business stakeholders need to be aware of the gain in savings and efficiency that procurement can bring them.
At a high level, procurement enables internal customers in one primary way; procurement practitioners take responsibility of projects and business needs better suited to their skillset, thus enabling team members from other work groups to focus on their core competencies. This can be accomplished in many ways. One common method is the implementation of an initial analytical layer of due diligence, which could be in spend, supplier analysis, risk mitigation, or contract review. Another common way to optimize would be by slicing away sourcing and vendor relationship management aspects of a project.
There are many ways that procurement teams can assist on projects, most notably by leveraging their core training in preparatory analytics. In order to negotiate and source effectively, procurement practitioners are trained to approach problems with a lens for data organization – an approach that is needed in almost every project involving cost, given that nearly all these projects will involve a vendor in some capacity. Moreover, early involvement by procurement in the vendor analytics of a project also gives procurement teams the ability to leverage their experience in spotting risk before significant resources have been committed to an initiative. However, what is often most important to internal stakeholders is the ability to project manage the sourcing initiative to reduce the RFP development time, response time from vendors, and design an RFP that can quickly and easily become a contract the legal group will approve.
Many work groups could likely try their own approximations of procurement activities, and they often do. For example, the practice of institutional buying is unfortunately common; this is simply a business stakeholder trying his or her hand at sourcing. Similarly, when a business stakeholder finds a vendor they feel is a strong fit, they may engage in what is called “single sourcing” and seek to begin direct negotiations with that vendor (often with less than stellar results, in terms of value capture).
This is not an optimal workflow, and firms with a seasoned procurement team will avoid this kind of narrow sourcing. Each problem and project are likely to possess different parts, some of which are best suited to procurement, and many of which are suited to business stakeholders from other work groups. Just as a procurement professional should not be building out technical specifications for server architecture, IT Infrastructure specialists likely should not be directly sourcing and negotiating contracts. The inherent magic of procurement integration lies in the way it enables teams to focus on what they do best, leaving the procurement team to handle the items it has trained to specialize in.
Operating a successful firm requires division of labor, and efficient utilization of resources— anything less is a disservice to the business and represents negligence on the part of those who by action (or inaction) are allowing it to continue. However, as always, there are two sides to the coin, and when procurement specialization is not fully utilized in a firm, it is also the fault of the procurement team. Just as businesses seeking to gain market share must plan for the future and seek to effectively predict the evolving needs of their customers, procurement organizations must proactively seek ways they can better assist their customers through data analysis and goal setting. As with any product, the product of procurement needs to be marketed before it can be sold.
