A Journey from Aerospace to Startups My first job was at a multinational company specializing in aerospace and aircraft systems. Occasionally, I had to engage with procurement for various projects within the organization. My role involved being an internal supplier, providing materials to an external supplier who would then create something for our company. The team I worked with was back in a different part of the company campus, and these projects typically took many months to complete.
After my time at this large enterprise, I transitioned to working at small, growing startups. These startups lacked formal procurement or purchasing organizations, so I would have projects approved by my management and finance teams. Often, this process felt like a bureaucratic hurdle impeding my quest for marketing success.
Discovering the True Scope of Procurement When I joined Scout RFP, a SaaS sourcing software provider, I quickly realized that my previous understanding of procurement was very dated. Procurement had a much larger role in the enterprise than I had initially experienced. A month into my new role, I was amazed to discover the extensive scope of procurement. I learned that procurement teams were critical strategic partners in achieving organizational goals.
The Hidden Gems of Procurement Excellence Listening to our customers during those Scout RFP years as they shared their engagements with stakeholders, it dawned on me that the procurement team was tackling significant challenges internally. This realization led me to think about how we could help shift organizational perspectives to recognize the immense value a strategic procurement team can bring to every stakeholder.
When stakeholders rush through or bypass proper procurement processes, enterprises expose themselves to significant risks and missed opportunities. Employees don’t intend to add risk; they believe they are helping the company by speeding up processes to meet urgent needs. However, a robust procurement function offers diverse advantages that ensure both efficiency and safety. Let’s explore these benefits:
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Stakeholder Alignment and Relationship Management Effective procurement facilitates collaboration among various departments, including legal, IT, risk, security, privacy, finance, and operations. This cross-functional approach brings diverse expertise to the table, preventing costly mistakes and ensuring comprehensive contract reviews. Furthermore, procurement builds and maintains strong supplier relationships, reducing the risk of disputes that often arise from informal agreements or personnel changes. (It is also observed by Gartner that involving more stakeholders in a software purchase increases the likelihood of user satisfaction with the chosen product.)
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Risk Mitigation and Compliance Procurement serves as the first line of defense against various threats. It ensures suppliers meet cybersecurity standards, protecting sensitive data from breaches. Moreover, it verifies compliance with IT, insurance, legal, and regulatory requirements, shielding the organization from potential legal penalties and reputational damage.
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Financial Stewardship and Value Creation Through competitive bidding, procurement secures the best value for investments. This process not only results in cost savings but also ensures the selection of optimal suppliers and products. Additionally, involving procurement early in the process prevents contract leakage, where organizations can lose up to 9% of their contracts’ value due to overlooked terms and conditions.
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Ethical Business Practices and Reputation Management In an era where corporate responsibility is paramount, procurement plays a crucial role in upholding ethical standards. It ensures compliance with Environmental, Social, and Governance (ESG) criteria, protecting the company’s reputation and aligning with stakeholder expectations. Thorough vetting processes help avoid partnerships with suppliers involved in unethical practices such as forced labor, child labor, or environmental violations.
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Global Risk Assessment and Mitigation As businesses operate in an increasingly complex global landscape, procurement’s role in conducting comprehensive supplier audits and risk assessments becomes even more critical. It helps identify and mitigate risks associated with international laws, potential terrorist links, or human trafficking, ensuring an ethical and compliant global supply chain.
Driving Transformation Through Procurement Beyond risk mitigation, procurement is a catalyst for business transformation:
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Innovation Enabler: By identifying cutting-edge suppliers and technologies, procurement can drive innovation across the organization.
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Agility Champion: Procurement can help businesses adapt quickly to market changes by maintaining a flexible and diverse supplier base.
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Sustainability Leader: Through strategic sourcing decisions, procurement can significantly contribute to an organization’s sustainability goals.
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Data-Driven Insights: Modern procurement leverages data analytics to provide valuable insights for strategic decision-making across the business.
Embracing Procurement as a Strategic Partner
It is time to shift the perspective on procurement to a strategic ally. By embracing procurement’s strengths, enterprises can not only protect themselves from various risks but also drive meaningful transformation across the business.
A Lesson in Strategic Procurement
This weekend, my nephew stayed at a boutique hotel, part of a larger hotel group on Cape Cod, and was pleased to find an in-room refrigerator as an amenity. However, when he opened it, he discovered it could barely fit two bottles of water and had no freezer. When he inquired about it at the front desk, they explained that during renovations, the head of guest services had ordered 100 refrigerators online without conducting proper due diligence. The refrigerators were under budget, met the deadline, and matched the room size requirements. However, after guests began asking about them, it was discovered that guest services had purchased medical refrigerators designed for storing small vials, not for vacationing tourists looking to store a variety of cold beverages.
This simple example sums up the difference between purchasing items and strategic procurement. Yes, it was under budget, the right size (outside measurements), the right delivery schedule, but it was completely the wrong supplier and wrong purchase, multiplied by 100. It didn’t meet the objectives and in the end is likely more frustrating than helpful for guests.
The lesson is clear. When we come to procurement with “an order” vs. a request, we do ourselves and our organization a disservice. With strategic procurement partner involved, they would have followed a process that would have caught the “refrigerator” error.
Conclusion: The Power of Partnership In the end, when stakeholders and procurement work together, the enterprise wins. It is a partnership that drives innovation, ensures compliance, and delivers real value to the bottom line, and that’s something every employee should get excited about.
Strategic procurement helps build a transformational rhythm into the enterprise, harmonizing efficiency, security, and value. It is not just a necessary step but a critical component of enterprise success. By embracing a high-functioning procurement team, companies can transform procurement from a perceived obstacle to a key driver of success, orchestrating a symphony of streamlined processes and strategic achievements.
Remember, when you are tempted to bypass procurement processes, you are not speeding up a project by skipping a step; you are missing out on a wealth of opportunities for growth, innovation, risk mitigation, and the chance to make a valuable new friend. Embrace procurement as your strategic partner, and watch your business thrive in the face of opportunities. By fully leveraging procurement’s expertise and strategic insights, you will unlock new levels of efficiency, drive sustainable innovation, and build stronger relationships within your organization. Love procurement, and let it be the catalyst for your success.
— Michaela
