Hot topic: Building a high-performing procurement team
Hot topic: Building a high-performing procurement team
During the recent testing times, the Procurement department has come to the fore for in many businesses. Organisations have seen the true value Procurement can offer for the entire business and those that have invested in their procurement team and systems have been agile, better able to adapt and better meet the challenges presented.
As the challenges continue to evolve and change so Procurement continues to deliver huge value when it’s embraced in businesses both big and small. Having a high performing procurement team can assist when facing these challenges and driving a business towards it’s goals
How do you develop a high performing procurement team?
For some, it may be about introducing procurement for the first time. For others, it might be more about how you can get the best out of an already established procurement function.
Having worked with numerous businesses across multiple markets and numerous procurement set-ups within these, here are a few of our observations.
Scenario one: Little to no existing procurement team
For businesses starting at ground zero with little or no procurement function, where do you start? How might you convince a leadership team to spend money investing to establish a high performing procurement team?
One angle here is to pitch directly to CFOs or FDs watching over the numbers. You can build a business case that considers return on investment. When analysing our typical return on procurement resources we see a return of 5:1 in savings benefit which can be added straight to the business bottom line
When building your business case areas to research and consider should include:
Analyse supplier spend data – Gather accounts payable data that shows what was spent with each supplier in the last year and focus on the top suppliers.
Review copies of contracts – Get copies of contracts for those top suppliers and work out contract renewal dates, identify opportunities to tender or to renegotiate, discuss potential opportunities with contract owners, ask them what support they would like in an ideal world. Everyone is busy, so extra resource to run tenders or negotiate with suppliers is often a good starting point.
Show added value – effective procurement isn’t just about the numbers, it also allows for more favorable trading terms, flexibility in contracts and service enhancements. Developing effective relationships with suppliers is key to unlocking these benefits.
Build a pipeline of activity – Log all identified opportunities and where possible take a view of what the potential value of the opportunity might be on a conservative basis.
Draft a business case – Consider what level of investment in procurement resources are needed, how much that will cost and therefore what return on investment could be delivered with the savings generated.
Whilst it’s possible to develop a function in-house, it can be a daunting and time-consuming task for a non-procurement professional. Without having the backing of procurement insight, credibility and experience it can be challenging to accurately estimate savings or resource costs, engage contract owners and gain buy-in from the leadership team.
Another option is to outsource the whole process, from analysis through to business case and to then use external resource to drive projects and deliver savings. Having supported many businesses with this kind of project, you can benefit from using our procurement experts with in-depth knowledge of your spend categories and suppliers. We are well versed in estimating and delivering savings and because of our experience, insight and data we can fast track the process.
We can also work with you to establish the procurement function to a “Business as Usual” level, allowing you time to recruit and establish a team to manage this on an ongoing basis.
In many cases, building a business case as an initial exercise has quickly shown the value procurement can bring which then leads to more resource and more investment to the ultimate benefit of the business.
Scenario two: Established procurement team looking to deliver further value
As a procurement function becomes well-established in a business and demonstrates it’s value, how does the team go up a gear and deliver further value? The ‘low-hanging fruit’ may be long gone, yet the business still expects value to be driven. Where does this value come from?
At Ebit, we’ve worked with many great businesses who already have an internal procurement team. We were able to support these functions with whole category reviews, specific tenders and project support and software implementations as they transitioned to becoming a high performing procurement team within the business.
Here are some of our observations:
Engage with all stakeholders – Is procurement looking at all areas of the business? Are there any difficult stakeholders? Build a plan for reaching out to areas of the business where procurement has previously struggled to engage. Plan for how can you win over stakeholders that have not worked with procurement before Consider what stakeholders’ pain points might be, what problems you could solve for them, what they want help with. This may be in the form of allocating resource to run a tender, provide insight on different solutions or expertise in a certain area.
Showcase where you have helped other parts of the businesses – can those people where you have done a great job act as a reference for other parts of the business? Ultimately, take time to build relationships.
Use an external procurement resource – Sometimes it’s hard to see the wood for the trees and one business will always find it difficult to have all the answers. Your procurement function are experts at sourcing and negotiating the key goods you require to function on a day to day basis but can they function to the same high level across all spend categories. To achieve same standard you will need to bring in additional expertise, and whilst adding headcount to the team may solve this it can take time to bed in and deliver savings. Using external resource is a way to bring in new ideas and see different solutions and can be deployed rapidly.
Leverage baseline data and market knowledge. At Ebit, we work with many different businesses and we have seen many different ways of doing things. This has allowed us to build a huge base of knowledge, insight, data and expertise. We can bring fresh insight and benchmarks to drive additional value. We also have numerous spend category specialists who bring depth of knowledge due to their sole focus on spend categories including IT, Marketing, Logistics, Professional Services, and Payment Processing as examples.
Work with your current suppliers – Good suppliers will know more about what they are selling and their market than the people in the business they are selling to, so tap into that. Talk to suppliers, share your challenges, ask them to come up with solutions, soak up their insight and knowledge. You can even formalise that process by issuing a request for information and inviting suppliers to present their solutions to you in order to form a view on what you want looking forwards.
Consider whole cost – Whilst a price may look great on the surface, is it as good as it could be right throughout the supply chain? Are all the parts on that supply chain set up as best as they can be, working as efficiently as possible? Break down the supply chain in as much detail as possible to understand its components. Think differently – what are the different ways you could structure a solution to deliver best value?
High performing Procurement teams really deliver great value at all levels and stages. There are some great businesses, both big and small, that have really benefitted from the value that procurement can deliver.
At Ebit we have had the pleasure to support many of them at varying stages of the procurement journey. We have huge expertise, insight, data and if you would like to benefit from that, we would love to talk with you.
If you would like to find out how Ebit could potentially help you build a procurement team from scratch or add value to your existing procurement function, get in touch.
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