The procurement department's move out of obscurity to the forefront of corporate planning and value creation has become a movement, namely strategic sourcing. This concept is based on the realization that procurement and the supply chain in general can and should have a continuing interest in managing contracts with suppliers, before during and after signing deals. This increased engagement has the potential to create much more value than simple cost negotiations.
The usefulness of strategic sourcing can only truly emerge when companies focus on it, at all levels of the organization. When leaders don't know how to work productively with their procurement teams, it can be difficult to internalize the process of involving supply chain stakeholders in overall decision-making. Forging this connection should therefore be a priority.
The alliance with finance
According to Financial Executives International, the bond between companies' financial teams and procurement departments is essential for businesses to extract maximum value from sourcing. The pressure on chief financial officers to realize bottom-line improvement means these leaders are likely searching all departments for possible value. The way to get this kind of return from procurement involves bringing these departments into the company's strategic planning.
Instead of simply issuing orders and seeking short-term cost cutting, CFOs can trust their procurement counterparts to take a leading role in strategy and overall organizational direction. Sourcing professionals who are able to actively assess their efforts and improve them over time are able to upgrade processes and change the way the whole company functions. This goes far beyond a traditional procurement role, in which the department only gets involved in vendor relationships at the last moment.
Financial Executives International noted that procurement leaders can also serve as canny guides to current and future corporate trajectory. CFOs who seek advice from their sourcing teams may find that these departments have a unique and valuable perspective on the way the company is developing, having been involved in setting the contracts for all the assets and materials being used throughout the corporate structure.
While the CFO is one key ally in updating sourcing, the C-suite connections don't stop there. Winning over the rest of the executive team is likely to be essential in truly freeing up procurement teams. Spend Matters reported that many leaders aren't ready to make this jump yet, resisting giving technology upgrades and related resources to the supply chain because it isn't customer-facing. This is a persistent problem for sourcing departments, as they must demonstrate their huge impact on the bottom line despite being mostly invisible to clientele.
The news provider pointed out that sourcing teams in strategic companies have allies both internally and externally, and that they extract value from the bond they create between these parties. Dealing with suppliers and the C-suite means that the procurement team is a unifying factor within a company.
Winning trust and earning a spot in a company's long-term plans may involve finding new ways to measure value and worth. If sourcing departments become better at showing the long-term value of strategic operations, they may earn trust - and a more permanent role determining companies' trajectories.