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null Everything you need to know about procurement


The role of procurement may seem straightforward, but it goes far beyond merely sourcing goods and services. The process can be complex and fraught with pitfalls.
Fortunately, in this article you’ll find advice for implementing a successful procurement strategy. By the end, you’ll be able to navigate any challenge that has potential to disrupt the process.

What is procurement in business? 

What is procurement in business? Put simply, procurement involves sourcing goods and services for an organisation. To keep the day-to-day business running smoothly, organisations may procure a variety of external ‘services’. You may see these purchases referred to as indirect spend.
Purchases are typically people-based products and services and often refer to something intangible. Consulting services would fall under this category for example. Your organisation may need to pay for consultant services, but the cost would not directly affect the bottom line.
However, the role of procurement is not a simple one. Each purchase is likely to have multiple stakeholders with different interests and priorities that may influence the process.
Even when reduced to the key steps within the process, procurement has many stages including:
  • Identifying a need
  • Researching exactly what needs purchasing
  • Finding suppliers
  • Contract negotiation and agreeing terms
  • Acquiring the agreed good or services

Does procurement have an image problem? 

The function of procurement has changed significantly in a relatively short space of time. But, despite the evolution of procurement, the overall perception of the processes involved remains stuck in the past.
Many people often see procurement as a purely tactical or operational function. Or rather the ‘lemon press’ that should squeeze the last drops out of potential suppliers.
Many procurement teams still have the image of a hurdle in the process rather than a strategic business partner. As specialists seek to define, implement and follow processes, they instead become a hindrance to supplier performance.

Risks: Lack of resources is restricting category management

A lack of resources and category knowledge within the function is the biggest barrier to effective category management. Particularly in regard to non-employee/contingent workforce spend.
Procurement specialists often work across multiple business functions. However, spreading expertise across many different fields can result in a lack of deep knowledge. A perceived lack of insights can make it hard to build trusting, sustainable supplier relationships.
A lack of trust in supplier relationships can in turn restrict the ability to deliver value add. By involving the procurement department at an early stage of the process, you can avoid these side effects.
The impact of a lack of resources is not just on knowledge, but capacity for investment in the process too. Employee and contingent workforce spend and the development of resource gateways could help to drive greater involvement. However, many also feel their teams have no time, budget or resource available to develop such gateways. Even in a spend area as large as services and workforce.

Opportunities: Tools and technology are key value drivers

Having the right tools and technology to access meaningful data is key. The right tools will enable teams to help support the business more effectively, adding extra value to the offering.
It is rare that procurement teams have access to the right kind of technology to gather data and generate reports. This is especially true for technology that can help to drive spend visibility and management.
With the IT department in charge of technology decisions rather than procurement, key functionalities are often missing. With no procurement strategy, the tools are often not future proof.

Looking to the future of procurement

There is often a divide in opinion regarding the role of procurement and its future.
Some feel that procurement’s job is to achieve both savings and a positive vendor relationship. Others feel procurement is there only for cost savings, especially in the current economic climate.
At Hays, we believe that the profession should seek to drive a more strategic relationship with both the business, as well as the vendors. We advocate focusing particularly on Total Cost of Ownership and Supply Chain Management.

Shifting to a strategic approach or procurement

Senior management boards are generally only interested in the specific cost savings projects that are on their agenda. It is important to seek out opportunities to get new strategies under the spotlight. Then, procurement teams can highlight the rising use of non-permanent talent, including services, contract and temporary workers.
Talent is on the agenda in almost every C-suite. Good procurement has the potential to make a significant impact on an organisation, enhancing access to the talent your organisation needs.

Three steps to strategic procurement success 

Procurement is still on a journey, but there are some essential building blocks required first:
1. State of the art technology to gather data to gain spend visibility to develop strategy.
2. Knowledgeable professionals capable of building bridges between teams within the business.
3. Support, sponsorship and buy in from the C-suite as well as from different business functions. Until all of these are addressed, the process will remain stuck in the old operational world.

Next steps for your organisation

Want to know more about Services Procurement and how it can work for you and your business? Contact us to learn more about Enterprise Solutions at Hays can give your organisation a competitive advantage.
Or take a look at the benefits of our services.

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