Not on the same page: Procurement and the rest of the business are misaligned.
It’s as simple as that: Procurement and the rest of the business are not on the same page. If you’re already nodding your head in agreement, you’re not alone.
More than half of the respondents to our survey indicated that their procurement function operates in a vacuum – procurement’s vision, strategies and policies are only somewhat or not at all aligned with the those of the overall organisation.
Here’s a quote: “Procurement neither has advocates in our organisation nor is it valued”
68% of finance professionals described the procurement function as ‘somewhat’ aligned to the core function of the business, whereas only 50% of procurement professionals saw it in that way.
How many respondents thought that their procurement function had a strong or complete alignment? That would be only 39%.
And if you really need more convincing that procurement and the rest of the business are not on the same page: only one finance respondent said that procurement’s strategy completely aligns with the company.
Perhaps this stems from the fact that there is a vast difference between what procurement needs to do, and what it does.
So, what is it that procurement should be focusing on?
Procurement is expected to improve how the business operates and to deliver an innovation capability through the supply base. Instead, procurement professionals are focused on cost reduction.
Of course, focusing on cost reduction, risk mitigation and increasing revenue are the key ingredients for a successful business; however, our respondents saw more value in procurement functions that were improving the way the business operates.
Here is a quote from one CFO participant in the study: “Creating value is not just about reducing costs, there needs to be a shift, so the procurement function is focussed on whole of business objectives, not just lowest cost purchase”
Procurement is structured to deliver cost savings, without the experience needed to generate innovation from suppliers. The real challenge is the shift to procurement having the ability to drive change throughout the organisation and implement suppl-led innovation.
Do you think your firm’s procurement function could make this shift?