Working together. The six qualities procurement needs for cross-departmental excellence.
What was often a separate and occasionally isolated part of a business has become integral. Procurement is now at the heart of operational decision making. The way that it can help to guide other business areas and in turn, how they inform procurement, has become critical to business growth.
In helping other teams to consider when, how and why they do things, procurement can make a substantial contribution to effectiveness. But it also drives its own performance and makes gains when it understands the pressures and thinking in other teams.
Strong cross-departmental teamwork can drive up profits and manage potential issues much more easily, but co-ordinating the needs of procurement with issues in engineering, sales, finance, or any other area, usually requires good people skills and collaboration.
These are the six skills that people need to make cross departmental procurement a win win:
Taking the time to understand why another team takes certain actions is crucial. The way that design and engineering specifies a product will affect the prices that can be paid for the raw materials and the overall cost of making it. This will then reduce or increase the potential number of suppliers willing to bid, so it’s up to procurement to establish why a product has been specified or certain materials have been requested.
There is often a balance to be struck between quality, safety and cost and only by working together to understand the reasoning on both sides, will this be met. There could be big benefits from procurement personnel spending time shadowing the teams they work with and for those teams to spend time in procurement, so that this understanding can be built.
Give and take is often the key in any negotiation, which includes procuring in conjunction with other teams. While procurement may be under significant pressure on cost and efficiency, the team it is working with may know there are quality or safety issues that mean cost should not be the over-riding factor. Reaching an agreement that delivers both objectives without one quashing the other is important.
Working together to know what the lead times and potential spikes in demand could be matters. When a production team sets a manufacturing schedule, it needs to give procurement enough time to deliver or production will be affected if materials cannot be sourced in time. While a large manufacturer may have in-built systems to tackle this, businesses in other sectors could stand to benefit by asking procurement to work with other teams to build joint timing plans.
Good internal communication helps organisations to avoid cost increases and the resulting hit on profits. A sales team will set forecasts based on past knowledge and future projections. If there are shifts in the economic or competitive landscape, the sales team will want to keep up with these, so they need to talk to procurement as soon as the landscape shifts. One party expecting or assuming the other possesses the same information, or is as immersed as they are, in their environment, might be optimistic. So keep the lines of communication open and encourage the other to talk whenever circumstances change.
Sharing information is becoming commonplace between procurement and finance because they have the shared goals of achieving savings and monitoring external risk factors. With the rise of e-procurement technology with finance processes incorporated, the need for procurement and finance to work together to ensure the seamless integration of new and existing systems is crucial. Where there is common ownership, the benefits of the new technology have to be communicated to all involved and teams encouraged to work together to identify opportunities and resolve issues.
One area where procurement can help another team to drive improvement is marketing. These two business areas are increasingly working together to optimise spend and deliver better reporting in a challenging economic environment, because demonstrating return on investment (ROI) in marketing is an issue. Charterhouse research shows that only 27% of marketing spend in Europe’s largest businesses is being measured for ROI, but that 65% of procurement teams are working with marketing teams to improve this. Learning to develop the tools to achieve effective analysis will be the goal for these teams.