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When did Procurement get Embarrassed about Savings?

When did Procurement get Embarrassed about Savings?

When did procurement get embarrassed about its ability to deliver effective cost reduction?

In recent times, many procurement teams have, to my mind, appeared almost apologetic about cost reduction.

And I think I know why.

For a very long time, cost reduction has (in some quarters) been considered the SOLE purpose of a procurement team.

We have been reduced to deliverers of a single purpose.

Cost reduction.

Deliverers of savings.

And against that backdrop we have fought back to scream “NO! Not JUST that, we can do so much MORE”.

And that’s true.

Increasingly procurement teams – or at least the really good ones – have become what I like to describe as Commercial Problem Solvers.

The “go-to” team within an organisation when strategies need devising, or implementing, or both.

A kind of golden thread running through the majority of commercial projects.

Covering

–       analytical skill

–       strategic design

–       change agents

–       risk management

–       drivers of 3rd party performance

–       owners deriving huge value from internal and external relationships

–       effective communication

–       enabling innovation

–       sustainability champions

So much more than just “The Cost Reduction Crew.”

And because we can do so much more, we should have a seat at the fabled Top Table.

Oh yes! The TOP TABLE I SAY!

But somewhere along the line, the pendulum has swung too far ….in my opinion anyway.

Now, instead of arguing that we can do much MORE than mere cost reduction we seem to have become rather embarrassed about the whole subject altogether.

Cost reduction? Shhhhhhh……

we don’t really talk about THAT……

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Perhaps we have all been a bit brainwashed by those stakeholders who always argue that a saving ALWAYS equates to a reduction in quality

Even when we know that it doesn’t have to be the case and normally isn’t if managed by a professional

That this is simply an excuse to avoid change.

Whatever the case, I would argue that while a procurement team CAN and SHOULD be about so much more than cost reduction, it MUST never forget that the ability to manage and control costs is often a fundamental part of its DNA.

If you have ever studied Maslow’s Hierarchy of Needs, I think a comparison can be drawn here.

With Maslow, it defines human needs and motivations into:

–       Basic Needs (like needing to have access to food and water, rest, warmth, security and safety)

–       Psychological Needs (like having relationships, friends, esteem and accomplishment)

–       and Self Actualisation Needs (like becoming the best version of yourself, realising your potential and doing what you were BORN to do)

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One key element of Maslow, in as much as I understand it, is that a lower level must be satisfied before you can progress to the next level.

So, if you are hungry, tired and concerned for your safety you are unlikely to be motivated by the prospect of fulfilling your potential as a painter.

 You just want a sandwich.

In a similar way, I think there is a hierarchy of Procurement Needs.

And right at the bottom there is Cost Reduction.

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Only when you have an effective level of delivery in cost reduction terms can you move “up” the hierarchy to the more progressive and sexy (hey – its all relative!) elements like risk management, sustainability and innovation.

It is pointless aiming for the higher, more sophisticated levels without the basic foundations in place

So, don’t be embarrassed.

Cost Savings are not ALL we can deliver.

But they are the foundations on which procurement can grow and do other stuff too.

Let’s not start bypassing them or being embarrassed about the need to deliver them.

Would love to get your thoughts on this article. Agree, disagree, its all good, just please don’t ignore.

Keith McCabe, Director – AVAM Solutions, April 2021

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IR35 Q&A: How to turn IR35 into an opportunity

IR35 Q&A: How to turn IR35 into an opportunity

We brought together a panel of experts for a Q&A session to break down some of the challenges of the new IR35 legislation in the UK and how it will affect contractors going forward.

Click HERE to watch it.

 

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Previous #ProcLive episodes

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Procurement is also Sales

Procurement is also Sales

We’ve all been there.

We’ve just spent ages fine tuning the commercials and the small print and have negotiated a great deal for our business.

We feel a million dollars. We may also have saved a million dollars.

We’ve certainly  provided the business with all the value they will ever need. The concerns over quality have been addressed. The level of service we can now expect will be a step change from what we’ve been used to.

But despite all this, the business just don’t seem to “get” it.

Why aren’t we being held aloft in the air with our very own victory parade?

The answer to this conundrum is that quite simply because procurement are often lousy at sales.

We’re good at buying stuff. That should be self evident from our job titles. We are Buyers, Heads of Procurement, Strategic Sourcing experts.

And when it comes to negotiation, no-one can beat us right? We are Ninjas! Gurus! We are fearless, relentless and creative problem solvers and we can always get to a “yes”.

Apart from the time we got fleeced in that market in Turkey, but we NEVER talk of that…..

But procurement is not just about procurement. It is also about sales.

Procurement simply have to be great salespeople as well.

This is not as much of a stretch as it sounds.

Much of selling is about influencing. For starters, procurement have to influence our suppliers on a regular basis. To persuade them to support us with our latest initiative, to help us with our sustainability objectives, to review our previously agreed contracts and commercials.

But we’re used to that.

However – equally, if not more importantly, procurement have to also be able to “sell” the deal to our internal customers.

Of course normally this is a very a nuanced type of selling and not so much a process which involves needing to “close”. Perhaps its a form of marketing instead.

Call it what you will, we definitely do need to convince our stakeholders that what we are “selling” is what they need.

Consider if you will the basic process of a salesperson and how it overlays with what procurement need to do with our internal stakeholders.

First off, find qualified prospects. For procurement, that’s a slam dunk here with internal customers. Prospects here equate to internal stakeholders. They are all “qualified” with the ability to choose to be compliant with your deal or not.  Tick.

Next is development of rapport. This can take time. To do this properly, with authenticity, it can take a LOT of time. For many procurement people this softer skill is often a lot harder than many of the technical skills they spend so long perfecting.

With developing rapport comes understanding. Simply listening to what is important to the prospect is really important here. Getting to understand a prospect’s pain points is a crucial part of what a salesperson does. As it should be for procurement with their stakeholders.

And when the rapport is established & the pain identified, the expert in sales can then present the credible solution to their problems, which just so happens to be what they are selling! Ta-Da!

The credible solution to their pain, from a credible person in a credible company (or in procurement’s case, department)

THAT’S what procurement need to do with their internal customers. NOT simply turn up, offer them something they are not convinced they need and then feel irritated when they don’t later consume it.

To me, that’s sales.

Daft as it sounds, procurement is not just procurement.

It is also sales.

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