The Hackett Group publishes a yearly study into the priorities of CPOs across the globe and the challenges those CPOs are facing in delivering their strategic objectives.
Many of the challenges procurement teams face will resonate with work winning and sales teams, including those related to developing the talent needed to meet their businesses changing needs and improving analytics and reporting. From both sides of the negotiating table it appears we're struggling to recruit, retain and develop the people we need to support digitisation of our professions and changing demands from our businesses.
The report highlights an interesting change in the priorities of CPOs. In previous years customer-centricity has been a high priority, but in 2020 it's been replaced with priorities focused on cost efficiency (whole life cost) and reducing purchasing costs. This renewed focus on the cost of the procurement focus may signal a change in buyer habits as a drive to reduce the cost to deliver procurement activities needs to be balanced with other transformation and digitisation, which need time, cost and resources to deliver.
A positive trend is that being seen as a critical friend to their business still remains a key priority, number three on the top 10. Leading CPOs recognise that building a stronger relationship with their business partners enables them to gain early involvement and greater spend influence. Sound familiar? I know many heads of sales who'd love to build better relationships with their delivery teams and business leaders to help better shape their activities and align them to the wider strategic objectives of the business.
The study also looks at the areas where CPOs feel they're well-equipped to manage change, areas where some improvement is still needed and areas that need critical development. Whilst cost-focused improvement is generally well supported or needs some improvement, becoming a trusted advisor to their business was seen as a critical area for development. And whilst some organisations are achieving this goal, many still need to leverage top talent to deliver consistency and need to develop a deeper knowledge of the business. Procurement models such as category management will aide this approach, as I discussed with Dana Small on the Red Review Podcast.
The question suppliers need to ask themselves is how can they support procurement teams in improving their efficiency, cost-effectiveness and ability to respond to business change?
Our response has to be one of support and understanding, reflected through:
Providing feedback inside and outside the procurement process - Leading procurement teams want feedback from suppliers and that feedback should come inside and outside the procurement process. Sharing views pre-bid helps teams to shape their approach to match market capacity and interest, feedback given at the end of a bidding process helps the procurement team learn from the process and refine their approach on future activity.
Encouraging the use of standardised procurement processes to improve efficiency - The variability of different procurement approaches adds complexity and risk to each tender. It increases the number of clarifications needed from bidders and increases the cost for suppliers, which in turn is passed onto buyers through higher rates. To help buyers meet their number one challenge of improving the whole life cost of procurement we have to work together to remove inefficiencies brought about by the variability of procurement documents, terms and processes.
Sharing business and market insights - Procurement teams should be able to look to their suppliers to help improve their market knowledge and address their skills gaps. This isn't an opportunity to share endless marketing brochures but a call to tailor market insights to be specific and relevant to buyers.
Overall, suppliers need to invest more time in understanding the strategic objectives of their clients outside of procurement processes. Account management and relationship management activities that respond to the needs of all of the customers' functions, including procurement, will ultimately give the best results for both parties.
The study found over half of companies had cost optimisation initiatives as part of their 2020 agenda. However, the research said “cutting cost is not enough” because digital changes and increasing competition meant companies needed to focus on multiple initiatives and finding value in new ways.