How can procurement add more value?

Procurement did in the past not always receive the management attention it should. This situation has changed in many organisations, but I wonder whether the potential added value of the procurement department / function is fully used yet. What I try to explore in this post is finding out what the enablers are to unleash the full potential of procurement. I have for example seen situations where the business engaged in (out)sourcing without (hardly any) involvement from procurement. Some of my thoughts to change this are:

Organise procurement as a process, not as a function
If one would define procurement as: is ‘the total of activities and performed in order to effectively and efficiently provide the organisation with all products and services it needs to perform deliver its endproducts and –services to its customer’ than procurement is something that does not stop at the boundaries of a department. It would be a process consisting of a number of activities, clustered in processes, which are independent of organisational boundaries. At least some activities would be performed outside the responsibility of a procurement department, and those people would have a ‘dotted line’ with purchase officers (people outside the procurement department would have a ‘role’ in the process). This would enable the chief purchase officer (CPO) to take integral responsibility over the whole procurement/ sourcing value chain.

Improve the capabilities of the procurement officers
There are various sources that can be used by procurement officers to become and stay knowledgeable and skilled. One of my questions is however whether the standard curriculums of procurement courses enable procurement officers to deal effectively with large, complex sourcing engagements. Driving the decision making and implementation of the more strategic ‘buys’ is an area where business unit leaders need expertise and support and now they often turn to external sourcing advisory firms to drive these projects. The question is however whether the organisation and CPO want to establish such a ‘procurement/sourcing centre of excellence’.

Some other reasons why procurement may not always be capable to show its potential added value are related to procurement officers:

• not being able to internally ‘sell’ their successes and capabilities to be perceived as an equal business partner;
• not always having the right skill set to support the fast changing and demanding business units and processes they are supporting;
• are seen by the business as too focussed on short term financial gains, adding (un)acceptable?) risk to quality, flexibility and long term benefits.

One of the effects of the perception within some large organisations of procurement is the creation of ‘retained organisations’ to manage and govern large (out)sourcing engagements, where various activities normally performed by procurement are (partially) duplicated. This thinking in organisational departments makes life simple, but it also introduces unnecessary indirect costs.

A combination of leadership from the CPO, more attention to the personal development of procurement officers and a process orientation could improve value adding capabilities of the procurement function/department/process.