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.
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.
– 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……
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)
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.
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