Typically, as a company grows in size, its Procurement department evolves accordingly. What starts out as a group of two or three buyers or category managers (let’s call this the Purchasing department) grows into a more established Strategic Sourcing department that executes RFXs, conducts spend analysis, and reviews and refreshes contracts. Over time, as the company continues to grow, Supplier Relationship Management (SRM) is added to the mix and a Chief Purchasing Officer (CPO) may be brought on board to oversee and guide the company’s procurement operations.
In smaller companies, a natural collaboration usually develops between the people in purchasing and the people who are directly affected by purchasing decisions (i.e., the end business users). But sometimes, especially in situations where companies experience drastic growth and are forced to rapidly increase the size and scope of their procurement departments, procurement loses sight of the importance of this collaborative relationship. In the chase for the highest possible cost savings, individuals can lose focus of the bigger picture, which may lead to strained relationships with incumbent suppliers and extra work in the future. Below are some of the main benefits of maintaining a collaborative relationship between business stakeholders and the procurement department:
- More effective sourcing events. It is important to understand why you are going to market for a certain category, and the best people to help you understand this reason are the people that work within that category daily. Are they unhappy with the capabilities or service levels of the current supplier(s)? Or are they simply looking to reduce costs while maintaining the exact service levels that they are currently receiving? Knowing the answers to these questions will allow you to tailor your RFXs and lists of invited suppliers to maximize the efficiency of the RFX process.
- A faster and easier implementation process. When business stakeholders are involved in the planning of sourcing events and in evaluating supplier responses, they will be more motivated to see the sourcing events through to fruition. When stakeholders are involved in creating supplier questionnaires they will be more interested in evaluating supplier responses and when they are involved in the selection of participating suppliers, they will be more interested in seeing how each individual supplier responded. And if they dedicate their time to all of these steps throughout the procurement process, they will be more motivated to ensure that the rest of their team works with the selected suppliers.
- Enhanced compliance levels. As stated in the above point, when there is stakeholder buy-in throughout the sourcing and implementation processes, there is a much greater chance of internal compliance to working with the new preferred supplier base. When business team members are involved throughout the whole process and are aware of exactly what suppliers are involved and why certain suppliers are eventually chosen, they will be more willing to buy-in than if they are just handed a list of new suppliers one day and told to work with them.
Most of this likely seems like common sense, but it is the kind of thing that people often forget to think about when procurement departments grow rapidly and team members are asked to take on new responsibilities that they may not have had exposure to previously. Keeping in mind the importance of collaboration between procurement people and business stakeholders can go a long towards achieving effective and efficient sourcing events within your company.