How Can We Improve the Performance of Procurement?
How can we improve the performance of procurement generalists and buying specialists to make purchasing more successful?
Some companies have dedicated procurement experts. These are people who have worked principally on purchasing throughout their careers. They focus on a specific category, such as buying IT. Their knowledge of suppliers, trends, and industry-specific sales practices make them valuable.
Other companies rotate generalists through the function. It is a fantastic way of developing senior leadership talent. This is more important now that procurement is (finally) getting its moment as a strategic role, not one pre-occupied with a bookkeeper’s obsession around cost savings but as a function focused on risk management and value creation at the enterprise level. We’ve written about this transformation previously.
See this article on the perennial debate.
“Procurement used to be merely a support function, a department creating transactions. Nowadays, procurement plays a highly strategic business partnering role touching every part of the value chain. Procurement professionals must have a combination of core skills and soft skills to connect the dots between sales and marketing, R&D, engineering, innovation, quality, supply chain, planning, and finance. A generalist will have a working knowledge of each discipline. In addition, they are internal consultants, relationship managers, legal and risk managers, financial advisors, supplier coaches and cheerleaders, negotiators, and business analysts. Procurement professionals are ‘expert generalists,’ a term coined by Bain. They do so much more than manage a portfolio of products.”
But this Platonic ideal confronts the hard reality of contemporary global markets.
“Procurement specialists, on the other hand, tend to focus on creating both breadth and depth in a specific category portfolio or commodity. As supply chains are much more global, much more complex, and ESG criteria take center stage, procurement specialists are taking a central role in guiding their firms in decision making. Specialists will have an in-depth knowledge of the markets, the supply base, regulatory compliance, the NGOs, etc. They are the subject matter experts that the CEO, the CFO, and the senior leaders go to for counsel to deliver the most value for their firms.”
Historically, there has been a tradeoff between the strategic, internal connectivity of the generalist and the tactical, external expertise of the specialist. Generalists ended up running the show, while accomplished specialists remained in place. What if technology could resolve this tradeoff?
To complicate matters further, generalists often come to a procurement role as part of a rotation through the firm. High-fliers with potential for senior management take short stints in roles of increasing responsibility across separate groups, giving them the strategic perspective to know which dots to connect, as well as the network of people internally to make this happen. What they lack in domain knowledge, they offset with context, relationships, and management skills.
Specialists may be exceptionally good at managing categories. They may not be as effective in helping the firm realize its ultimate vision. They lack the strategic orientation and the internal connectivity.
What if we could give generalists access to the business knowledge and skills to help them become better procurement officers, faster? What if specialists could develop their internal networks and strategic engagement?
For this to work, generalists would need easy, rapid access to category intelligence. Specialists would need to connect with individuals from distinct functions within the company around specific procurement projects, in all categories, not just the ones in which they specialize.
There are two ways to access category intelligence: databases, and other people.
Unfortunately, most procurement sits stranded as “dark data.” Here’s Gartner’s definition:
“Gartner defines dark data as the information organizations collect, process, and store during regular business activities, but fail to use for other purposes (for example, analytics, business relationships and direct monetizing). Similar to dark matter in physics, dark data often comprises most organizations’ universe of information assets. Thus, organizations often retain dark data for compliance purposes only. Storing and securing data typically incurs more expense (and sometimes greater risk) than value.”
Imagine if a generalist could go to one place and see the following, in structured form, about what their firm has done in the past: live RFPs/RFQs in the market; historic RFPs/RFQs along with supplier responses; and historic contracts, including pricing information. Now, imagine if there were a parallel repository of what government agencies were doing to supplement. Structured form means that it’s easy to digest.
Currently, too many organizations either have this knowledge buried in loosely connected spreadsheets of varying quality, consistency, and relevance, or it is lost in an arcane system used only by the high priests of purchasing.
When it comes to other people, imagine a social network in which people from different companies could find one another to discuss and share ideas about specific category markets. A buyer from company A who rarely purchased software could find someone from company B with recent experience.
For technology to help plug specialists into the wider firm, this social network would need to include people from different internal functions such as marketing, sales, product, and finance. Ideally, these individuals would get access to the structured data, too. The specialist gets to see and participate in the larger conversation, as well as accessing category data and other specialists in different organizations.
How can we improve the performance of procurement? Opening up procurement like this turns it from a specialized backwater into a central player.
This is what we have built at EdgeworthBox.
We built EdgeworthBox to be a solution that helps both buyers and suppliers on their intertwined journeys. Our purpose is to cut through the bureaucracy, the friction, and the noise. If we get it right, we’ve enabled buyers to purchase the right solution, from the right supplier, at the right price. Also, we will have made it easier and faster for suppliers to sell and create long-lasting relationships.
We’re different than other tools buyers and suppliers use.
It’s free for buyers and suppliers to join to access our tools, data, and community. Buyers pay a small fee for executing purchasing transactions. Buyers can check out suppliers invisibly without triggering an avalanche of sales-y solicitation. We have a social network and we have repositories of public sector statements of work for rapid access to market research. We make it easy to vet the risk of counterparts with our standardized due diligence framework.
Give us a shout.