PASA Comment – Moving the conversation beyond cost savings

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Two articles I have read this week – “Defining success” by Tim Cummins, President and CEO of IACCM, that we published yesterday, and the article he references by Jonathan Cooper-Bagnall of Proxima Group entitled “Defining procurement success”, illustrated very well a couple of the key challenges that we will be addressing at our October conferences.

The main thrust of both pieces is around the disconnect between what C-suite executives see as priorities for procurement and what procurement sees itself as its priorities. According to the quoted research, C-suite executives overwhelmingly saw cost savings and cost avoidance as the number one priority for their procurement function, while procurement was more concerned about touchless transactions or driving process efficiencies. Both of these priorities I found disappointing. In the case of the C-suite view I wasn’t surprised, while I would be inclined to challenge the procurement view of its top priority as not being representative of the profession as a whole. As I discuss content and issues of the day with procurement leaders here, I don’t find touchless transactions figuring very high on the list of priorities (maybe it is, but it’s not very interesting to talk about!). Much higher on the priority list is the need for procurement to demonstrate and communicate the broader value it brings to the organisation.

With the theme for the Premier ConfeX in October being “Creating procurement value through alignment” we will be exploring the subject of value in some depth. Defining value and who it matters to – value is in the eye of the beholder – will be high on the agenda. I have just last week added to the programme a plenary panel session where we will discuss “how do we measure value”, particularly the value that is not easily translated into hard dollar figures. Finding ways of measuring and communicating this value to all stakeholders, by being aligned with their needs, is fundamental if procurement/supply management/commercial is to thrive in the future. Hopefully having many of the leading lights in the procurement profession in one place at one time to discuss the subject will enable us to come up with some answers for the benefit of all.

The second event we are running in October is “Supply chains for the C-suite”, in Sydney on 28th October. The whole premise of this event is to attempt to challenge C-suite thinking on what world class procurement should look like and highlight the broader value contribution that it should be bringing to the business beyond cost savings and cost avoidance. The programme for this event will be released shortly and I encourage all of you interested in the future of the procurement profession to circulate it as widely as possible (‘upwards’) to C-level executives. If C-level focus remains exclusively on cost savings as the measure of procurement success, then procurement has a limited future. For if procurement is successful at what it does, these savings will eventually gravitate to zero. What then, when there are little or no further savings to deliver?

I am going to conclude by printing in full one of the comments on the original article by Jonathan Cooper-Bagnall by a lady called Karon Evanoff  that I thought particularly pertinent. This could start a whole new debate around not just defining and measuring success, but whether the procurement name itself acts as limiter, confining the conversation to cost savings. Interestingly, after much discussion, we changed the name of the “Supply chains for the C-suite” event from what we originally planned –  “Procurement for the C-suite” – for very similar reasons. Anyway, I leave with you Karens comment for future discussion:

I think what you state resonates strongly for me personally. As supply chain leaders, I think using the term Procurement limits the scope to cost savings by default. Touchless transactions should be a given and on the infrastructure roadmap. For some reason, this becomes an argument on IT resources linked to an old ERP infrastructure. The fact that we are still discussing what can be now be more readily achieved with cloud based service providers is indicative of what supply chain leaders need to start focusing on fast.

The fast are eating the slow in the competitive landscape. NEW types of supply chain practitioners need to be the agents of change. To do so requires up to date understanding of value drivers to enable the value proposition to be made to the C-suite. It’s tough and time consuming and the results aren’t overnight, but they are more sustainable.

Supply Chain is more than “procurement” or “Purchasing” – it is an integrated function encompassing our customers’ customers all the way through our suppliers’ suppliers. If we just talk about purchasing then we lose the entire scope of value that can be derived through the chain and continue to run into leaders that view it as a “necessary” evil.”

 

The 3rd Annual PASA Premier ConfeX takes place in Crown Melbourne on 14th & 15th October. Click here to view the programme.

Supply Chains for the C-Suite takes place at The Intercontinental Hotel in Sydney on 28th October. Click here for more information.

 

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Procurement and Supply Australasia (PASA) is the leading provider of information and education to procurement and supply professionals throughout Australia and New Zealand. PASA supports the largest community of engaged procurement stakeholders in the region, through its renowned series of events, publications, awards, plus various community and network building activities. PASA is a trading name of BTTB Marketing, for many years recognised as the leading producer of conferences and events for the procurement profession in Australia and New Zealand. Whether producing under the BTTB, CIPSA Conferences or now PASA brands over the last ten years, our events have consistently led the market in terms of both educational and networking opportunities.

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