Strategic Procurement: 4 Tactics for Economic Recovery in 2021

by Alex Saric

In August 2020 Gartner published this report “4 Tactics Procurement Can Use to Sustain Influence as Economic Conditions Improve”.  This blog summarizes the key points of the report which you can read in full, here

Procurement Teams Step-up

When Covid-19 hit, supply chains across the globe nearly came to a halt. Procurement’s value became evident, as did the importance of the supplier relationships they had built. According to Accenture, 94% of Fortune 1000 companies saw supply chain disruptions and 75% had negative or strongly negative impacts on their businesses due to the pandemic. As a result of the disruption, cost management and supply chain visibility were suddenly top of mind for executive leadership teams. 

Leading Procurement organizations who had the right procurement processes and supply chain technologies in place were able to mitigate the impact of that disruption by staying agile and providing businesses with the supply chain data they needed to make rapid, informed business-decisions. However once the virus subsides and supply chains begin to recover, businesses may again lose sight of the true value of strategic Procurement. 

Historically, the role of Procurement has been regarded as being exclusively aligned with cost management and supplier management, which is only part of the full picture. The Procurement team adds tremendous value in many areas, including operational performance, product quality, faster time to market and more. Yet to provide all of this value, it’s critical that Chief Procurement Officers have a seat at the table in discussions that impact the business.

Unfortunately, this is not usually the case. In fact, recent Gartner research shows that less than one-third of procurement teams are well-informed about the priorities of their business partners, and this limit’s procurement’s ability to support them, particularly when economic conditions fluctuate. To connect with business partners and be included in discussions about key business initiatives, Chief Procurement Officers must demonstrate and prove their value in ways their business partners can understand.

A Blueprint for Demonstrating the value of Strategic Procurement

In a recent summary of Gartner research, Director Analyst Ryan Polk outlined four key tactics that Procurement leaders can use to hold on to the seat at the Boardroom table they’ve gained during the pandemic. Here’s a quick summary:

1.Influence The Board by Mapping the value of procurement projects to business priorities.

Gartner’s report noted that during economic recessions, Procurement has much more influence over business decisions, but when economic conditions improve, they don’t. For instance, during the great recession of 2009, 85% of Chief Procurement Officers reported they had more influence than prior to the crisis, but by 2013, that influence waned significantly for two-thirds of those leaders. To stay relevant, Gartner suggests documenting all the ways procurement projects align with business priorities during recovery and beyond. This list should include the business metrics that each procurement project impacts. In the report, Gartner provides a helpful example of what a value map could look like.  You can see the full diagram and read the report here

 2. Teach staff how to track changing business priorities.
Business priorities change all the time, and without insight into the latest directives, alignment falters. It’s critical to be vigilant. Leaders can help staff stay on track by requiring category or sourcing managers to capture and document procurement analytics and updates from partners, such as information about long-term goals, challenges, KPIs and expectations they have of Procurement in terms of helping them meet their business objectives.

3. Help staff sell procurement’s value during recovery.
Although most Procurement teams report supply chain metrics on cost savings, less than 20%  measure and report on their contributions to driving revenue. Simply updating reporting business-facing dashboards and reports with metrics that are aligned with business initiatives can help. 

In the report, Gartner provided some great examples of supply chain metrics that highlight Procurement’s value outside of cost-savings. Gartner also outlined a helpful 6-step process for selling Procurement’s value. Called the Challenger Reframe Choreography,  the process is aimed at influencing decision makers and building a narrative using facts and data that demonstrate the potential impact of Procurement’s proposed solutions. 

4. Track functional influence using an annual business alignment survey.

Measurement is critical to achieving any business goal, and proving Procurement’s value is no exception. Gartner recommends conducting annual business alignment surveys to assess the perception of Procurement across business units. It’s tool, the Procurement Business Alignment Tool (BAT), evaluates 30 attributes of the Procurement function across multiple spend categories.

Keep in mind that managing the business’s perception of the Procurement team and the value it provides is an ongoing endeavor, not a one-time exercise. Gartner recommends that for best results, the process should become a standard operating procedure.

Influence Begins with Good Relationships

The disruption continues to be severe, and no one can anticipate how long the global recession will go on. Long-term impacts can be mitigated by agile and resilient procurement processes and strong relationships with business partners and suppliers. Organizations that have systems and technologies in place to support rapid, informed decision-making and efficient operations will be able to weather the disruption, and maintain influence they’ve earned.

You can download Gartner’s full report here. For information on how Ivalua’s end-to-end eProcurement solution can improve transparency and data quality in your organization to support these efforts, contact us today.