Jun
8
5 reasons why your head of procurement probably has a worse job than you
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We all have times where we think our job sucks. Whether that’s just because the day brings a series of problems that are difficult to resolve or perhaps there’s conflict with other team members within the business. We all know that there are times when work can be challenging and we think our job is the worst.
But if you think you have it bad, spare a thought for your department head who probably has it a lot lot worse.”
Of course, one of the main challenges is that in a leadership role your answerable for performance, procurement (and supply chain in general) is one of those functions that can be influenced by various external factors outside of the department and at times it can feel a little like sticking your thumb in a hole to stop the water pouring out – sooner or later you’ll find more and before you know it you’ve run out of fingers!.
So what problems are Procurement leaders likely to face that makes their job worse than yours? Let’s take a look at the top 5.
1/ Compliance – Ensuring compliance with agreed business governance rules and enabling processes (like contracts) can be a nightmare. As procurement people, we know what makes sense and what works but unfortunately, some may see this as hindering their day job and an “I know best” scenario kicks in that actually causes the business harm. Ensuring compliance (especially in large companies) can keep even the best procurement executive awake at night.
2/ Unrealistic demands for savings – we’ve all been there – the business has problems – who’s going to get it out of the hole it’s dug itself – of course, those procurement folks. Setting unrealistic savings expectations not only does the business harm it can prevent procurement from working on the activities that matter.
3/ Cost Creep – One of the symptoms of a business that does not have its supply chain under control is cost creep. It might be gradual and across many commodities but bit by bit cost creep can happen and once it does it can rapidly become a major issue that often requires robust strategy changes. There can be a multitude of reasons for why this happens (at the supplier level) and how the business accepts it but of course, it’s the role of the procurement exec to resolve it.
4/ Business systems – Ahhh Technology, it can be a super duper enabler or a cast iron weight around your ankles. I’ve come across countless supply chain execs who blame much of their woes on legacy IT systems (or even worse new ones that weren’t scoped properly). Many supply chain departments have to find workarounds to plug the gaps and the resultant system becomes a control on how much change can be applied.
5/ The team – Yes, that’s right you’re the problem!! One of the key enablers to procurements ability to deliver its objectives is its workforce. Finding the right people to fit the appropriate roles can be a real headache especially if you’re hamstrung through poor funding for salaries or weak promotion prospects. Also what about skills, can you train? Molding a set of individuals into an immaculately functioning supply chain team takes hard graft for often little reward.
Ultimately, the role of Procurement executive can often feel as though it’s a thankless task with problem after problem thrown at you to hinder progress. However, if you get it right it can be a richly rewarding career for a right-minded (and problem-solving) individual
Got some thoughts on what the worst procurement job is? We’d love to hear your feedback below.
Jun
6
Why you’re probably going about procurement savings all wrong
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The main target for procurement savings projects is to drive down purchasing costs, and product prices. The unfortunate thing is that most companies look to introduce a cost savings project when it’s too late.
Picture the usual scenario: a problem will occur affecting margin and the business will react by throwing procurement resource at solving the immediate issue, the team will develop a savings strategy (usually based on scant information) the business will hold them to it (often increasing it without appropriate evidence too). Once the company has identified a savings plan the team sit back thinking it’s a job well done. And herein lies the key problem.
Too many companies fail to adopt Cost Savings and embed as a core business process (as part on ongoing continuous improvement).
On the flip side, without the correct controls there tends to be a free for all in terms of procurement activity, people go out and buy anything from anywhere and that drives cost. Correct controls need to be established in order to maximize the companies funds.
Without a doubt, this is the key difference to those companies that do cost savings well and those that don’t.
So you realize that cost savings should be part of an ongoing plan, but what savings should you embed in that plan? Here are 10 examples
1. Buying against consolidated requirements
2. Buying lower spec parts that still meet requirement
3. Deploying appropriate buying controls (who’s allowed to buy and how)
4. Automate the purchasing process
5. Use effective cost model tools which can be used to track change on built products
6. Compete major acquisitions
7. Utilize appropriate replacement strategies – make purchases only where necessary
8. Review and categorize indirect spend and look for areas of consolidation
9. Train staff on effective purchasing and controls
10. Deploy appropriate metrics and review regularly
Developing a robust savings strategy doesn’t have to be challenging but it does need to be continuous. There are usually a multitude of areas where savings can be made. The usual path is through a combination of indirect and direct savings.
At its root it requires robust and sensible procurement management and co-ordinated and holistic business approach.
How do you manage your savings projects? We’d love to hear about your experiences, feel free to use the feedback section below.