Procurement & Strategic Decision-Making
Procurement is a critical function in any organization, yet it’s often left out of strategic decision-making. In this blog, we’ll explore why procurement deserves a seat at the table and how it can contribute to the company’s strategic direction.
Why procurement is often left out of strategic decision-making
Procurement is often seen as a back-office function that simply purchases goods and services. However, the truth is that procurement can play a vital role in shaping the company’s strategic direction. By focusing on using their skills and resources to create transparency in their work and achievements, improving communication with their stakeholders, and building their market and supplier knowledge, procurement teams can become strategic partners and help drive the organization forward.
It’s worth noting that procurement teams are often filled with hard-working and skilled professionals, but they still struggle with prioritizing efforts and aligning priorities with management. These two topics are often mentioned as key reasons why the teams struggle with creating transparency in their work and contribution. Having hands-on experience in procurement functions of various companies and industries, we’ve seen this firsthand.
One of the reasons why procurement is often left out of strategic decision-making is a lack of understanding about the value procurement brings to the organization. Procurement teams are, unfortunately, often spending vast amounts of time on topics that the stakeholders do not recognize as value add – and thus being perceived as either non-value-adding or even a bottleneck for the stakeholders.
How procurement teams can contribute to strategic decision-making
Procurement teams need to be more transparent about their activities and communicate their value proposition to stakeholders. By doing so, they can showcase their cost-saving initiatives, risk management strategies, and other value-add activities.
Additionally, procurement teams can contribute to strategic decision-making by:
- Identifying new opportunities: Procurement teams can identify new suppliers, technologies, and innovations that can help the company achieve its strategic goals.
- Managing risk: Procurement teams can help manage supply chain risks by developing contingency plans and identifying alternative suppliers.
- Driving cost savings: Procurement teams can help the company achieve cost savings by negotiating better contracts, consolidating suppliers, and optimizing processes.
- Supporting sustainability: Procurement teams can help the company achieve its sustainability goals by working with suppliers who share the company’s values and developing sustainable procurement policies.
To be effective in these areas, procurement teams need to build strong relationships with key stakeholders to align their strategies and prioritize their resources to support the company’s overall objectives. This requires open communication, collaboration, and a willingness to learn and adapt to changing circumstances -and, procurement needs a toolbox allowing the procurement team, the stakeholders, the CFO, and the organization as a whole to track the impact and agreed priorities. This level of transparency will be an important step in building trust – and trust is a key prerequisite for the procurement team to be recognized and therefore be invited to support in the strategic decision making.
Conclusion
In conclusion, procurement deserves a seat at the table in strategic decision-making. By improving transparency, building relationships, and contributing to the company’s overall objectives, procurement teams can become strategic partners and help drive the organization forward.
