If you’re one of the 74%* of CPOs citing cost reduction as their top priority this year, you will naturally turn to technology and process to evaluate suppliers, analyse the market and effectively manage data to secure the best purchasing deals. As a procurement leader, however, it’s crucial to add ‘forging relationships’ to that list.
Building relationships within and without your organisation not only supports you in leveraging expertise, networks and resources, it can also work towards your goal of saving money.
The themes of these relationships can come under three banners: top level executives within your organisation (the C-Suite), non-procurement colleagues and external partners.
1. Buy-in from the C-Suite
Key findings from Deloitte’s Global CPO Survey 2016 showed that relationships with the C-Suite were of utmost importance and tend to be better than general engagement across an organisation.
A good relationship with the CEO will give you greater knowledge of the company’s overall strategy and aims. This will help you gain a greater understanding of how procurement fits in with the bigger picture and whether your strategy is in alignment. Moreover, it will enable you to see where procurement can further support the goals of the organisation, especially in terms of increasing quality and making savings.
Cost reduction is a key strategic driver for most CEOs, and as the recent survey showed, it certainly is for at least 50%.
Your Chief Operating Officer (COO)
Having regular contact with the COO will provide valuable insight into the running of the business as whole, and whether the procurement department is an efficient part of that machine. If that’s not the case, conversations with the COO will ensure better integration with other departments with the potential to share resources and maximise efficiencies.
CFO or Finance Director
The Deloitte report reveals that a majority of CPOs expect a drop in operating costs due to internal pressure from CFOs and subsequent scrutiny on improvements. Developing a relationship with the CFO will educate you on the true financial ebbs and flows of the procurement department. Having a better picture of profit and loss will allow you to make relevant cost-saving changes, as well as use the information to bolster your own case for investment.
2. Gathering Insider Knowledge
The same principle of the C-Suite applies to internal relationships outside of your department, namely working relationships will provide valuable insight and enable better integration and possible cost-savings. The difference being that peers and internal customers may be cautious of providing support for fear of losing their own status, having their funds reduced or indeed be unwilling to spend precious time without knowing how they will benefit. You can overcome this by making the effort to understand how fellow departments work, asking colleagues about challenges they face and what they need.
By focusing on making efficiencies and improvements to the procurement process that will help them, the savings will follow.
3. External Partners
Negotiating new payment terms is certainly helpful in reducing costs. However, suppliers, and other external partners such as purchasing cooperatives, could also be willing to give you access to benefits they enjoy from their own partners such as preferential payment terms, free shipping or discounts to other services and goods you may need.