The CPO's Corner
I keep hearing about the value of aligning procurement with my company’s strategy. How do I do that?
It likely is not a shock that most companies can still operate without indirect procurement. Yes, they’ll spend more and be less efficient, but the basic work of providing services to clients can still take place without a fully functioning procurement organization.
Indirect procurement optimizes value. But imposing policies and processes is bound to be seen as a negative – an impediment - by a significant number of people in the firm, especially when a procurement function is first created. That’s why my advice is not to tackle category strategies as a first step in a transformation process. Instead, find a business problem and solve it. Maybe there is a consistent delivery problem with a supplier, maybe another’s costs have increased dramatically, maybe a third has been unresponsive to requests for support. Maybe there is a logjam within the company that a third party can resolve. Business executives expect procurement to come in and lead with cost reduction discussions – what better way to be seen as a value-added team player than to actively seek identification of pain points and make them go away?
Whatever it is, we either hear complaints from the business or can just see obvious issues ourselves. Jumping in and finding a solution changes the conversation with the business. It gives you the opportunity to lead with something they’ll perceive as a big plus.
Once you’re in and established, don’t get buried in optimizing current categories alone. The best procurement leaders keep an eye on where the company strategy is heading. In a simple example, if there is an industry shift from mailing brochures to email marketing, sourcing capabilities must adjust. But even more broadly, new business ventures must be supported in new ways. As demanding as today’s problems may be, the smart leader spends at least a little time building capabilities for the future simultaneously.
Your company’s ambitions for new services, markets, and processes should be top of mind during the hiring process. To successfully align a procurement organization with a company’s strategy, the individuals on that team must be curious and adaptable. They may be experts in a particular category today, but capable of adjusting to new categories as business needs change.
Meet with business leaders, read their strategic plans, and develop yours so that it clearly supports theirs. Share it and seek feedback. As you touch base periodically with key people on the business, you’ll be able to discuss progress on these initiatives, carving out a solid spot for procurement as an integral part of moving the business forward.
Joanna Martinez is a global procurement / supply chain leader and the founder of Supply Chain Advisors LLC. She is a frequent lecturer and blogger on procurement topics and also provides coaching, strategy development, training, and cost reduction opportunity assessment. Her clients range from Fortune 100 companies to technology startups.
As either regional or global CPO, Joanna has led transformation initiatives for companies in many different sectors: among them Johnson & Johnson (consumer products), Diageo (beverage), AllianceBernstein LP (financial services) and Cushman & Wakefield (real estate services, property management). She has also held client-facing roles, effectively giving her the opportunity to “sit on both sides of the table”.