The assertiveness of centralized procurement

The same way finance goes after an overcharge or HR pursues a harassment claim, new centralized procurementdepartments must know how and when to keep stakeholders accountable.  There are two main components of stakeholder buy in and compliance – the first is all about education and the second is about prioritization. Procurement is responsible for ensuring stakeholders understand and embrace the sourcing practices established and respect the policies, just the way they understand those of HR or other functional areas. At the same time, they need to understand the value behind sourcing efforts and the role they have to play supporting strategic goals of the organization.

Commonly, a newly centralized procurement department will need to establish credibility and demonstrate the value across the organization can achieve through procurement’s intervention. In many cases where the sourcing function has been decentralized or delegated to functional areas (i.e. IT, Marketing, etc.), that have undertaken procurement practices of their own, more evident resistances to a centralized procurement function will arise. In such scenario, not only do stakeholders hold knowledge on their category, but they are also masters and commanders of all negotiations. They are contract keepers, and possess supreme control of all supplierrelationships; which in fact may predispose them to question or even challenge any possible improvement “an outsider” - named centralized procurement - can generate. Don’t get me wrong, stakeholder units should always have full clarity on who their suppliers are and manage healthy relationships with them, but that doesn’t mean they should solely own the selection process, negotiation efforts, or their performance management, but more on that later.

New strategic sourcing departments must be bold in their messaging while balancing stakeholder engagement and buy in. Think about how HR would act for instance; in that they would never hesitate on the limitations to employees abusing benefits or misbehaving or how assertively the Marketing function decides to tackle the market to expand the footprint. That is the same way a centralized Procurement unit must establish clear and (more importantly) enforceable guidelines on how the department will support the organization efforts to establish healthy relationships with suppliers, that will drive innovation and minimize the risk of supply chain disruption, while providing clear direction to the rest of the company on what it must do to enable its success.

The goal of centralized procurement is not to alienate stakeholders but to break a paradigm, in that sourcing or procurement efforts are purely tactical and that they can be conducted a local level. Centralized procurement’s goal is to become a strategic resource to the organization and relieve other departments from responsibilities outside of their core competency.

Strategic sourcing practices must be owned by Procurement, supplier relationship management, contract management and negotiations are areas that must be driven by procurement and supported by the stakeholders, not the other way around.