Procurement teams are generally assessed on their ability to meet budgets. But if they hit their target every time, does that mean they are really good at their job, or that the spend target is too easy to achieve?
Should you be asking your procurement team to cut costs even more, or should their success be more closely aligned with company goals and driving shareholder value?
Clearly, when margins have been cut back several times there comes a point where simple cost cutting cannot be achieved. As a consequence, the more astute procurement teams focus instead on ways to impact total cost of ownership, overall profitability, business competitiveness and other elements that drive shareholder value.
To test whether your team has made that leap and moved away from the traditional procurement role into the more dynamic, mission-critical role that your business needs, try this simple checklist:
1 Are they a fundamental partner in the operational side of the business or a function of the business responsible for buying?
2 Do they understand what drives real value in your business?
3 Do they understand your business processes…. and challenge them?
4 Do they understand how your supply chain partners add value to your business, and challenge them to deliver more value?
5 Do they work collaboratively with supply chain partners and your own operational staff to devise new ways of working?
6 Do they know the cost of downtime and the impact of late deliveries?
7 Do they talk about reducing prices or reducing total cost of ownership?
By changing the targets towards looking at ALL the elements that make your business competitive, the procurement team becomes intrinsic to business operational planning. Not all teams are ready for that, but with appropriate consulting and training in place, your existing team can drive even more shareholder value for your business.
Contact us for an audit of your procurement team practices to:
- identify areas where profit margin could be increased, through cost reduction and operational changes
- discover new approaches that could have a positive impact on your competitive advantage
- assess the impact that an Insider Procurement coach could have on your procurement team, your profit margins and growth targets
Or, if you'd like a little more information about our approach to begin with, download one of our eBooks: