Finding the Gaps: Business Strategy & Procurement Execution

A recent survey on strategy and execution found that while a very small number of executives (around 8%) are capable of both good strategy building and execution, leaders who are good at strategy are nearly always also good at execution.

This will definitely resonate with procurement department since it is essential to have a clear strategy to guide the tiring and often mundane procurement operational work. With its role as internal auditor and cost control center, procurement has created processes involve a lot of paperwork and matching of data from different sources. As such, there needs to be a clear vision of both short and long term goals, in order to not get lost in the quicksand of daily tasks.

Aligning procurement & business strategy

Business strategy is usually provided top-down, a fact that we can debate, but few organizations want to change. This means company goals may often be out of alignment with the principles of the procurement department. Times of economic boom exacerbate this trend, since every company then focuses on the top line and market share rather than worrying about cost or compliance. Procurement's role in such a scenario is to be an enabler: reducing time and delays in managing procurement requests and in finding agile vendors who can contribute to rapid product development. The scenario changes in time of economic slump as cost savings and tighter compliance to spending/contracting norms are required.

The role of a procurement leader is to anticipate such changing needs and accordingly model a plan to identify and quantify opportunities for improvement. This will ensure a symbiotic relationship between procurement and other departments and gain trust of other departments.

Aligning resources to proficiency

The next step is to align resources efficiently. Historically the efficiency of a procurement department was heavily reliant on human resources; nowadays technology has gained equal importance. Solutions like Spend analysis or Procure-to-Pay not only improve efficiency but also provide newer methods to tackle procurement issues. To achieve the daily tasks of procurement, collaboration is the key and having software which supports collaboration between and within teams, and help manage large multi-stage projects are the need of the hour.

However the most important decision is to allocate time for activities. There needs to be a proper mix of strategic and tactical operations and also enable mitigation of last-minute “emergencies” which is a common bane for most procurement teams.

Tracking & recording the after effects

A well-laid strategy, as mentioned above, almost always guarantees good execution. In addition, the planning itself should have a clear process of documenting and analyzing the effects in a timely manner. Historically, the deep analysis of strategic sourcing tasks was done post-facto, often months after the cost has been incurred or the sourcing event is completed and so on. For a company to remain competitive this needs to change. This means the cycle of spend analysis needs to shorten, sourcing events need to be tracked and managed on a dynamic platform, contract compliance issues need to be spotted early, and supplier risks need to be tracked on a continuous basis.

This is all a part and parcel of a successful procurement strategy aligned with business imperatives. It might seem a bit mind-boggling to look at real world scenarios and try to map them to a well-defined process.  Remember, though that extra time spent formulating the initial plan is in most cases is the sure way to success.

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