Contributing to the CEO’s Agenda: Procurement and Growth

Contributing to the CEO’s Agenda: Procurement and Growth. For the last year’s, growth and not cost savings has been on top of most CEO’s agendas. At the same time, they associate procurements contribution to the organization as delivering cost savings. This perception is clearly very damaging to procurements claim to play a strategic role in their organization and take a seat on the board.

Be Strategic or Die

Digging a little further, CEO’s have learned that seeking revenue growth alone is not enough and that such a strategy can have a damaging impact on margins. However, margin protection through the pursuit of cost savings in isolation can be harmful as cutting cost in the wrong areas can also wreck the growth strategy. So CEO’s are now focused on “Earnings Growth”, that is “profitable growth”.

Sophisticated procurement organizations are well placed to lead in company growth strategies, and procurement leaders must set their agenda to drive the pursuit for growth. In setting their agenda, they should look at both the drivers for growth in their companies and also the barriers to growth.

The following strategies are some suggestions for consideration:

1. Collaboration with stakeholders, customers, and suppliers
2. Think beyond cost savings and identify customer value
3. Development of supply strategies to support customer value
4. Management of the supply base to secure innovation and mitigate risk
5. Set up sophisticated performance monitoring systems to measure results and take any corrective actions

In the current economic climate, markets are fluctuating so much that strategies and deals need regular monitoring and review, requiring close monitoring of key markets by procurement. The drop in demand for products and services is the ultimate barrier to growth, that and the potential for your company’s competitors to capture all the market growth, leaving your organization in decline.

Many manufacturers will now have excess capacity, and many of your suppliers will be finding capital harder to secure which will impact future investments. However, if your competitor’s, outmanoeuvre you  by securing spare capacity, or negotiating better deals to gain a cost advantage, or collaborates with its suppliers so that capital investments do not damage future growth. Then your organization will be at a significant disadvantage.

The choice for procurement and supply management is clear – be strategic or die. The choice for organizations is also clear – be a leader in supply management or die.

Nuff said …