WHY PROCUREMENT IS NOT THE ENEMY OF INNOVATION

Is procurement about putting dogma before dynamism? There are perceptions that procurement is process and compliance driven,  slow to respond to change, and too rigid in its approach to allow innovation.

CIPS, the Chartered Institute of Procurement and Supply, reports on research findings from eprocurement specialists Wax Digital showing that 83% of businesses surveyed did not think their supplier base could support their future growth plans.

“Certainly, in some organisations, procurement takes a cautious approach and focuses too much on cost. In all areas, but especially in IT software and hardware, this can leave businesses trailing in the wake of innovations that always seem to be a few steps ahead of them,” observes Jonny Michael of JMCL Consulting.

However, process and compliance in procurement are there to mitigate risk, so that businesses are not exposed to unreliable suppliers, or failing to use budgets efficiently.

What this should do, is provide a firm foundation from which businesses and organisations can then have the freedom to innovate and expand by embracing their suppliers’ suggestions and new developments.

Strategy and Simplicity

“The thing that holds many businesses back is the lack of proper engagement with suppliers and an understanding of their businesses,” Jonny suggests.

Without clear understanding and flexibility, procurement may well end up getting bogged-down in detail, and start to feel divorced from the organisation or business they should be serving.

“Detail in procurement is essential, obviously,” offers Jonny, “but so is vision. Your procurement function must match your organisation’s growth – in fact, it should be enabling that growth. After all, procurement is a support service not an end in itself.”

Jonny emphasises the importance of procurement being a collaborative process – so that it embraces supplier input and dovetails with wider business objectives – and a simple one.

“Suppliers know about the innovations in their industry. Suppliers often know more about their parts of your business than the procurement function does. The right suppliers want to help themselves by helping you. That should be embraced,” he says.

Enabling Freedom

Making procurement dynamic rather than dogmatic requires approaching it differently.

Rather than seeing its processes and rules about compliance as barriers to progress, they should be viewed as enabling factors.

“Too many people see the role of the Procurement process as limited to negotiating on cost and policing compliance. A better way is to for Procurement to enable collaboration and partnership with the right suppliers,” Jonny advises.

This means implementing a procurement process that looks at a supplier’s specialist track record and what aspects of value the supplier can deliver.

“Value is a crucial factor,” says Jonny, “the best suppliers don’t just want your business, they want your business to succeed and a long-term relationship. If the performance of the supplier’s product and service contributes to your success it should naturally lead to longer contracts. Everybody wins.”

Clearly not every supplier has a huge impact. Some products and services will always be a commodity. But this is where understanding of strategy and performance ensures the correct supplier engagement.

To give a business the firm foundation it needs to be agile, adaptable and profitable means proper supplier management. Procurement processes are key in making this effective.

“Enlightened procurement is as much about this management aspect as it is about selecting suppliers. It’s about giving businesses the freedom they require to be innovative, while safeguarding their supply chains and reducing risk,” Jonny concludes.