Defining the Boundaries of Your Procurement Function  

By: George Mathew

Effective procurement leadership requires critical thinking and the ability to anticipate future needs. It involves having a comprehensive understanding of the procurement landscape to make informed decisions that might come with potential risks but with even higher rewards. According to best practice research, a center-led organizational structure is preferred. This means that a central authority is responsible for training and education, performance measurement, dispute resolution, system oversight, and supply-chain management. This enables agencies to focus on utilizing their subject matter expertise to assess and procure products and services that best meet their requirements.

Procurement professionals must take the time to evaluate their decisions and reflect on their performance for continuous improvement. It is essential for leaders to continuously improve their skills and enhance procurement outcomes. Procurement decisions made by government agencies can significantly impact the lives of many individuals. When procurement leaders comprehend the effect of their decisions on the overall public welfare, they will be encouraged to become more skilled and competent in their procurement practices.

Leadership skills that every procurement leader must possess

Strategic and actionable vision to make efficient decisions:

Procurement leaders need to have a forward-thinking mindset and the ability to develop and drive the procurement strategy in line with organizational goals. Senior leaders may have a vision, but it takes domain knowledge and experience to understand how to translate this vision into procurement action. They provide guidance on optimizing the sourcing process, improving supplier relationships, and leveraging procurement as a strategic function that adds value to the business. High-level procurement leaders rely on comprehensive data analysis and insights to make informed decisions. They use advanced analytical tools and technologies to assess supplier performance, monitor market conditions, and identify opportunities for cost optimization and process improvement.

Relationship management and risk management skills:

Procurement professionals often find themselves in direct communication with the CEO of their suppliers. They handle escalated issues and work with suppliers to improve collaboration and drive innovation. Procurement leaders play a crucial role in identifying and mitigating risks associated with the supply chain. They assess their organizations risk appetite, oversee the implementation of risk management frameworks, monitor market trends, and proactively identify potential disruptions. Working closely with relevant stakeholders, they and their teams develop contingency plans and strategies to maintain a resilient and secure supply chain.

Create meaningful cross-functional relationships:

Procurement experts widely acknowledge the importance of establishing more robust connections with other functional areas, but the task of cultivating substantial cross-functional partnerships necessitates resolute leadership and dedication. Senior procurement executives work closely with various departments within the organization, such as finance, operations, and senior management. They play a pivotal role by offering strategic direction, harmonizing procurement strategies with the specific requisites of these departments, and nurturing cooperation to realize shared objectives. Through the adept utilization of their leadership and communication proficiencies, they guarantee the efficiency of cross-functional collaboration and synchronization.

Strong people management skills to develop a high-performing procurement team

The role of procurement leaders is to efficiently manage and develop a highly efficient procurement team. They provide effective leadership, guidance, and mentorship to their direct reports, fostering a culture of collaboration, accountability, and continuous learning. These executives ensure that the team has the necessary skills, resources, and support to meet organizational goals. They set clear performance expectations, conduct regular performance evaluations, and identify opportunities for skill development and career advancement.

How can SpendEdge help procurement leaders improve the procurement function?

Category Intelligence:

We conduct a thorough analysis of the market’s inner workings, encompassing its operational intricacies, recent industry trends, and emerging developments that could impact your sourcing strategies. SpendEdge’s expertise enables you to identify and spotlight the market’s foremost influencers. This includes recognizing the pivotal players and discerning the service or product providers that hold substantial sway over market dynamics. This in-depth assessment equips you with the intelligence needed to make informed decisions, forge strategic partnerships, and optimize your procurement efforts effectively.

Best Practices Identification:

By Leveraging SpendEdge’s resources, you can delve into the strategies and methodologies embraced by your industry peers to bolster your procurement acumen. This entails a meticulous analysis of the most effective practices for vendor selection, engagement models, contract negotiations, and cost management that your peers are employing. We enable you to identify and benchmark these best practices against industry standards. By doing so, you can establish a comprehensive framework for honing your vendor relationships and achieving superior cost efficiency.

Insights on Engagement Models and Negotiation Strategies:

SpendEdge facilitates the acquisition of profound insights into market-specific engagement models, offering an in-depth exploration of their respective strengths and weaknesses. This knowledge equips your procurement function to make informed decisions. Furthermore, SpendEdge assists in crafting a dynamic negotiation strategy framework that empowers your team to achieve significant cost reductions. This, in turn, enhances your organization’s cost-effectiveness and profitability, positioning you at the forefront of strategic procurement practices for sustainable financial success.

Success story: How SpendEdge helped a chemical manufacturer

Our client, a US-based chemicals manufacturer, had been manually managing its contracts so far which was becoming cumbersome due to the large number of vendors they were dealing with on a regular basis. Challenges included missing out on fine details in the contract, missing contract renewal dates at times, not being able to effectively negotiate during contract renewals, to name a few. The client wanted SpendEdge to help them understand the loopholes in their current process and the steps to take to overcome these challenges.

SpendEdge analysts used a two-step process. First, a peer benchmarking exercise was conducted to understand how the client’s competitors were managing their contracts. It was determined that the client needed to implement a contract management software to see improvements in their process. In the second step, a thorough analysis of all the capabilities of various contract management software available in the market was conducted. The features, cost, and support provided for each of the systems were benchmarked. In addition, the important SLAs to be included in the contract along with KPIs to determine the effectiveness of the system were provided to the client.

Our insights helped the client narrow down a small set of suppliers who were invited to the RFx stage. Eventually, the client selected the product from one of the suppliers recommended by SpendEdge. In addition, the SLAs provided were used to create a favorable agreement.

Contact us now to solve your procurement problems!

Author’s Details

George Mathew

Associate Vice President, Sourcing and Procurement Intelligence

George is a procurement specialist at Infiniti Research and provides advisory services to clients across the pharmaceutical, CPG & FMCG, energy, and automotive sectors. He specializes in the procurement areas of industry benchmarking, cost modeling, rate card benchmarking, negotiation advisory, and supplier intelligence.