What is your Procurement organization's purpose?

Previous articles in this series define three important elements of an effective Procurement team: Vision, Interaction, and Perception. But a developing team can’t impact these things without having a clear understanding of Procurement’s function within their organization.

• We can’t define our vision if we don’t ultimately know the role Procurement is to play in our organization.
• Likewise, our interactions can only reinforce positive relationships when stakeholders understand how we functionally fit into their world.
• The perceptions other teams have of Procurement tie directly to the amount of value our function provides.

Function drives the roles we hire, the metrics we track, and the processes we develop and memorialize. Failing to define our function could mean focusing on the wrong roles, metrics, and processes – moreover, Procurement cannot present a cohesive message of our value without a clearly defined function. This can lead to turmoil inside the team as roles are likely not clearly defined at that point.

Defining Functional Types

Function will always be organization-specific. Some Procurement teams handle strategic sourcing and collaborate with business units on new initiatives. Others simply process the requisitions needed to purchase items other teams want. There are three main types of functions a procurement department will fall into:

• Clerical: Review requisitions and ensure people follow proper policies and processes. The only value-add is confirming that other teams are doing things correctly.
• Tactical/Analytical: Run sourcing events and may keep tabs on subscriptions and other recurring expenses to ensure proper renewals. Value is added in a reactive way.
• Strategic: Procurement adds value in a proactive way, identifying cross-departmental initiatives that could combine to save money or providing additional benefits to the organization. This may include consolidating suppliers, negotiating for purchases on behalf of the entire company, or collaborating on new initiatives. Procurement ensures other organizations get more value than simple tactical support, and view the function as a boon rather than an impediment.

Defining Your Organization’s Function

Defining function is more complex than these buckets might suggest, but they are a good starting point. As part of your vision, you may want to perform a broader procurement transformation in order to position your Procurement organization as strategic leaders in your company.

Corcentric’s Jennifer Ulrich will be speaking at the ISM World Annual Conference in May on how to do just this. Her session covers how Procurement can build lasting relationships with key partners to success. She will present three case studies demonstrating challenges we’ve seen among our clients and the solutions we employed to solve these challenges.

Need help defining your Procurement organization's function? Register today to attend.