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Innovation and the role of Procurement: Part Two

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Gary Noble

In my last blog I outlined how innovation and the demand for sustainable operations are changing the business world, putting greater pressure on procurement teams to define and embed a procurement strategy that is future proof. But where should professionals start when it comes to enabling this? The Procurement Director is a member of the executive team and so should co-determine the direction, image, values and product requirements of the company. As a Procurement Director, begin by going back to basics and visiting the company’s customers. Understand their changing requirements, look at how they apply or use your products now, and ask them what they want from your company. What improvements and changes are they looking for both now and in the future? You can plan for these visits together with a marketing and or sales person, but getting a first-hand insight such as this will help to greater understand your company’s evolving position in the market.

  1. Ensure regular meetings are diarised with marketing and sales. Reconfirm the image the company is striving for as well as long and short-term plans for products and innovations wanted in the firm’s future portfolio. What do customers see as important during the sales process and how can procurement aid this? Remember, the more information you have to hand the better aligned procurement will be with the rest of the organisation. 
  2. Get to grips with the production process Ask key questions such as what are the bottlenecks and what are the critical parts/raw materials at the moment? From an operating working capital (OWC) perspective identify who currently contacts the suppliers, who decides stock volumes and packaging sizes, who is responsible for the OWC costs and do you have shared targets and objectives? And as always, discuss how procurement can collaborate more to help support innovation in production.
  3. Grow the relationship with the Finance Department. Assess the purchasing value to sales to identify where current pitfalls are and which margin requirements are changing. Greater collaboration with finance will help the procurement team to understand how the firm really measures its success, a key piece of knowledge in a constantly changing environment.
  4. Have monthly catch ups with the Research, Development and Innovation department as they are perhaps the most important internal customer for procurement teams. Clairify and define the roles and responsibilities in the innovation process, agree on the expected outcomes for pricing, margina and timing. Together, select suppliers and set clear expectations on co-operation and co-developments with these selected suppliers. if these meetigns take place on a regualrt basis, procurement will never be taken by surprise and can work proactively on solutions for all stakeholders accross the business.
  5. Finally, cross reference the above with the Procurement department's activities. Information gathering is useful, but it needs to be incorporated into the daily activity of the team. With the knowledge you have gathered, check if the right procurement strategy is in place and that contacts have been established between procurement and the rest of the firm. Is the team aligned with the evolving innovation strategy of the business? Are the right deliverables being measured? 

Remember, in a world where innovation is critical to businesses, communication is vital to ensure all departments are in sync. Make sure procurement is the spider in the web and that the company utilises the tremendous value it can generate throughout this innovation process.

Dick Bartelse

Procurement Consultant

Procurement in motion

Bartelse@kpnmail.nl