Procurement organizations have long been criticized for being overly cost conscious, resource and technology constrained and extremely reactive. This perception fuels negativity within the Procurement team, bringing about defensive behavior. The perception turns to reality when senior management finally takes notice – their Procurement team is a laggard when compared to the industry leading Procurement teams. Unfortunately, it is also a sign of lost opportunity and can equate to millions and even billions of pounds in lost revenue, cost savings, and working capital.
Senior executives with laggard Procurement teams are typically blind to the profitability and return on investment opportunities that lie within their Procurement organization. Organizations suffering from this laggard mentality have a few telltale signs of their struggles:
- Little to no margin impact from Procurement department
- Cost avoidance and savings are the main Procurement KPIs
- Reactive, resource and time constrained Procurement teams with no consideration of time or value
- Spend Under Management is recognized as a term by senior executives; but the definition, KPI and traceability of Spend Under Management is not identified or tracked
- Sourcing is dispersed throughout the organization, not as a Center of Excellence (COE)
- Ideas from outside of Procurement are perceived as threats, not business value enhancers
- Opportunities to create visibility, awareness and drive real value are thwarted with excuses, such as “we have already done it”, and “we don’t have time to try something new”
- Long “source to settle” cycle times
- Threatened Procurement leadership
- Working harder vs. working smarter to deliver value
It takes recognition to start a path towards leadership – where is your organization on the journey to procurement excellence?