Article: Align to Unlock Business Value – How Procurement is Transforming from a ‘Cost Cutter’ to a Strategic Advisor

Overview

As procurement continues its transformation from a “cost cutter” to a strategic advisor, the opportunities for driving real business value and making a lasting impact are abundant. 

By embracing ESG initiatives, tackling the talent shortage, and showcasing ROI, procurement professionals have the chance to shape the future of their organisations and contribute to a more sustainable and successful business landscape.

In our New Rules of Procurement Engagement series we are engaging with leading procurement thought leaders and practitioners, from global powerhouses to tech wizards, to gain insight into the changing landscape taking place in procurement. 

One key area where there has been positive change over the last few years is procurement  being seen increasingly as a strategic resource that can add real business value. This sentiment is echoed in the latest CPO Rising 2023 report by Ardent Partners: “The role of the Chief Procurement Officer (CPO) has become both universal and critical to operations and outcomes, as business executives have recognised the strategic value of procurement in driving profitability and growth.”

Due to the turmoil of the last few years and baby-boomers naturally retiring from senior procurement roles, there is a new breed of procurement professional coming through the ranks. This new breed recognises the shifting sands of power and is capitalising on this unprecedented opportunity to influence the top table, whilst driving greater efficiencies, reducing cost and building strong relationships. Procurement is no longer just the ‘cost cutter’ but a strategic advisor and value generator.

But this ‘shift in gears’ remains in the context of continuing to achieve cost savings due to the pressure of inflation, supplier price increases, threat of recession and supply chain shortages due to geopolitical issues and production constraints. A sentiment echoed by Ardent’s research which found that identifying cost savings is the top priority for 46% of CPOs* this year.

As cost savings become harder to achieve and require more than bullish negotiation tactics, a more strategic approach is needed. While adept at spinning many plates, this is perhaps a new challenge for some procurement professionals. 

In our interviews with the Changemakers we repeatedly heard the advice that, to deliver real business value, including cost management, procurement must be closely linked to business needs and goals. 

“Procurement is very much in the spotlight to drive forward all the issues around sustainability, rising costs, high inflation, and many other business challenges. Procurement really is the best placed function in a business to deliver on those opportunities.” Nick Drewe, Market Dojo

Think strategically

While it might be difficult to step away from the ‘day job’ to focus and spend time on strategy, by using best-of-breed tools to streamline and automate administrative and repetitive tasks, time will be freed for strategy formation.

Thinking strategically and taking the time to gain sponsorship at a C-level and with key stakeholders is key to elevating procurement’s value and influence.

“You can do any project or the best negotiation ever, but if it’s not aligned with the business and you don’t have a sponsor, you will not be able to go anywhere.” Caroline-Patricia Huberdeau, Leroy Merlin

And, it doesn’t end with stakeholders. Procurement’s connections with suppliers and manufacturers put them in a unique position with a finger on the pulse of changing market conditions, governance, and compliance requirements. This enables them to steer the business in terms of what it really needs, where it might need to pivot, and how it can optimise its operations.

What are the other key areas where procurement needs to act strategically?

Embrace ESG

ESG undeniably has become a board-level issue. With governments introducing new climate-driven legislation, industry and environmental bodies exposing ‘greenwashing’ tactics and public/social opinion driving brand reputation, ESG is firmly on the agenda.

“ESG cannot be overstated in terms of how critical it is for procurement teams to get this right, because this will become a board issue.” Richard Nixon, SpendHQ

Procurement is one of the best placed departments to embrace ESG and embed it into the fabric of organisations and their wider marketplaces. By taking advantage of its influence and connections across the supply chain, procurement can play a change-making role in driving ESG adoption and making the world a more sustainable and ethical place.

How healthy is your ESG score? Read our article How to Keep Your Procurement ESG Strategy on Track in 2023

Tackle talent shortage

Many articles have been written by HR and recruitment experts on the “war on talent” but whether this is a ‘self-styled’ situation or not there will always be a ‘pull’ on the best and brightest talent.

“I do think that the bigger challenges are ones like talent, both retaining your current talent and finding talent in procurement and strategic sourcing.” Canda Rozier, ex-CPO

For procurement to attract the new breed of procurement professionals who are looking for more than just a job, it needs to address their aspirations and ambitions, position procurement as an attractive career path, and equip people with best-of-breed technology and tools they need to be successful.

“Procurement does need to compete with many other industries and professions to try and attract the best talent to drive the profession forward.” Nick Drewe, Market Dojo

Show the ROI

To gain active sponsorship from C-level stakeholders, procurement must show the business value and ROI. Similarly, if procurement processes are not considered to be aligned with business needs then optimisation efforts will be thwarted, including digital transformation programmes.

“If procurement teams are looking for investment in technology or in supply chain CapEx investments, they now need a very robust business case for soliciting that money from finance and with payback much quicker than might normally have been considered.” Nick Drewe, Market Dojo 

Procurement teams need to work on their business case, to cross all the t’s and dot all the i’s! To think in terms of a ‘framework of success’ that encompasses planning, decision-making, implementation, and review.

So, how will you embrace the transformation and embark on the path to becoming a strategic advisor?

Get more insight into the New Rules and join the Changemakers!

* Responses from 341 CPOs and other procurement executives via web-based survey.