The future role of procurement will be to manage and collaborate with suppliers – not just cost savings. The reasons are many, but the key argument is that a narrow focus on cost-saving will actually cost you in the long run. Not many CFOs want to acknowledge this, but it is a fact that relationships matter when it comes to business, even for CFOs.
Focusing only on reducing prices and pushing suppliers is evidence of a short-term approach and will most likely damage the long term relationship, and you will not get the full value (in terms of help, service, information etc.) from the suppliers you could have had and may suddenly need.
Only in certain commodity categories and long–tail spend it makes sense to focus only on price. However, these categories are minor compared to other non-commodity categories where service, logistics, support, innovation, and other add-on services play an important role in the full value delivered from a supplier to your company.
Get inspired by the best
Google is probably one of the best examples in this context. In Google’s procurement team the term “savings” is simply banned from being used. The reason is that Google does not focus on saving an extra X% on the price.
Instead, Google focuses on finding and working with suppliers that can help the company develop the next big product or solution for the market. Like self-driven cars or air-balloons providing internet to the entire world.
As a procurement leader, your role in the future will be to lead your suppliers and apply the practice in SRM and supplier collaboration.
This means to show initiative in relation to suppliers, communicate a direction for your suppliers, measure their performance, and then engage and collaborate with them to influence and manage them in the direction you want them to go.
The procurement leaders that succeed at this practise will not only be extremely successful in their procurement role, but they will also advance into even greater roles like COO and CEO.
Why SRM is the future of procurement management?
SRM increases efficiency and reduces the cost of processes associated with suppliers on operational, tactical and strategic levels. For example, when receiving/using products and services, developing new solutions/products, continuous improvements in the value chain and managing joint projects.
What is more, it gives an opportunity to identify areas where suppliers need to improve to create more value (or reduce costs) for the company. The value creation in a well-executed SRM program is clear.
Thanks to that, you can meet the needs in a better way, creating greater value beyond cost savings.
Your turn to implement innovation to procurement management
SRM enables you to manage suppliers, so they can help your company be even more competitive in the market either via better delivery/quality execution, faster services, new innovations etc.
Enter the future of procurement management by reading SRM handbook to uncover all the aspects of successful supplier relationship management. It will help you to deeply understand why SRM program is necessary for every procurement professional and what values it brings to your business.
The potential is huge and unexploited, which is the reason why you should get started today at building implementing your SRM program.