Procurement needs to follow in the steps of marketing

A recent interview I conducted with a former Chief Procurement Officer who has worked for over 25 years in procurement in various industries captures what I believe is the true opportunity that exists for supply management executives.

“The space occupied by procurement is not well understood by the CEO or the CFO in most companies, and in many cases is not well understood by the CPO themselves!  There is a huge opportunity as organizations roll out category strategies, as these have a huge impact on the top line and the bottom line of the company.  We need to back away from the standard 2 X 2 matrix approach, and recognize the importance and magnitude of the risk that needs to be documented in the supply chain.  Procurement is the only platform in the company that has an end to end horizontal view of the supply chain.  Marketing and IT see this to some extent, but not like procurement.  Procurement must take this opportunity to exercise leadership and truly position procurement as a strategic contributor at the executive board level on organizational decisions.  This means bringing the right level of ambition to the table.”

This statement provides a a true indication of the gap that exists in the ability of procurement and supply chain executives to build a case for their cause.  While readily identifiable as important, this ability to bridge stakeholders and suppliers is in fact a challenge for many organizations we spoke with recently.  For example, several procurement executives noted that they had difficult getting internal stakeholders to see purchasing as anything other than a “cost-cutter” or “hardball negotiator”.  In fact, several organizations are taking steps to promote procurement as a more strategic function, and have compared this evolution to the evolutionary path of the marketing area.  This ability to act as a boundary spanner between internal and external parties has been identified in past studies as “Reverse Marketing”, but we prefer to use the term ‘congruent capability’, in that it establishes congruency between stakeholder needs and supplier performance metrics.   Prior to the 1980s, marketing was viewed as a mere sales order taking activity, and has grown to be recognized as a critical function that links customer needs with internal business planning.  A similar path lies ahead for procurement, as the same set of congruent capabilities required for solid marketing is required for stakeholder-supplier integration. Both marketing and procurement talent pools can learn skills from one another as they develop applications in each of their respective areas.  The merging of buy-side and sell-side capabilities is one that was adopted by the International Association of Commercial and Contract Management (IACCM), and provides a natural basis for integration.  Indeed several of the executives we spoke with explained the approach they used to create the right type of “blended skills” needed to drive better internal alignment of procurement with the functional roles in the organization.