Defining elite performance in procurement: 3 common cornerstones
What do high performance procurement organisations do that gives them competitive advantage?
Procurement Excellence is hard to define.
It isn’t based on metrics, benchmarking or even software as some commentators may claim.
The experience of many of the world’s leading procurement organisations is that it’s actually a ‘way of working’ that combines three crucial strategic, operational and behavioural-based cornerstones in a way that creates competitive advantage:
1 – Direction
2 – Execution
3 – Leadership
1 - Direction
Direction is the strategic cornerstone of effective procurement.
This is the ability to set and articulate clear direction; to provide both vision in what a procurement function should be doing – and why – together with the intent to make it happen. Very simply this is “doing the right thing”.
2 – Execution
Execution is the crucial operational cornerstone of effective procurement; the functional capability to deliver results and get things done.
A procurement function must be delivering the core processes (as detailed in the diagram below) and executing them effectively.
Strategic Sourcing, Supplier Management and Contract Management must be the core processes running through the organisation, supported by backbone processes such as Spend Analysis and all driven off a robust and efficient Purchase-To-Pay process.
Execution is the physical activity which makes things happen as a result and is the ultimate measure of procurement functional performance.
Without execution procurement does not impact profitability.
3 - Leadership
Leadership is the behavioural cornerstone which galvanises the strategy and execution; it is the ability to bring others with you on the journey. In procurement, leadership has two faces; one internal and one external.
Internal leadership is the ability to engage stakeholders; the critical success factor in procurement success.
External leadership (supplier based engagement) defines success in both sourcing (driving value) and supplier management (maintaining and increasing value).
Points to consider
- Direction. Have you got a Procurement Strategy? Have you defined what, where and how procurement supports the overall business objectives of your organisation? (handy tip… before you start, read the mission statement!) Do you know where you are now? …where you want to be? and do you have a Procurement Development Plan to get bridge that gap?
- Execution. Do you have the core procurement processes in place? Consider the Procurement Process House. How effective are these operating? Without execution there is no P&L impact, so get this right.
- Leadership. Are you engaging and taking external and internal stakeholders on the journey? You can do poor sourcing and there is no impact or you can do great sourcing but if no one uses the contract, there is also no impact.