A view of Procurement.
Is procurement (you can call it supply, purchasing or acquisition) just about sourcing and buying materials, goods and services? Well no – to be an effective procurement organisation and meet the targeted business outcomes requires more capabilities than sourcing and buying.
What about selling? Procurement should do this both internally and externally. Inside your business there are two activities where selling is important.
The first is the business strategy review in which business needs are identified, together with the resources and capabilities to be internally generated or externally supplied. Procurement must undertake supply market studies so they are prepared to confidently sell to the executive group the benefits and risks of a particular approach in each major supply market. This should include selling ‘investment’ opportunities within selected suppliers.
Examples of these ‘investments’ to improve your business outcomes could include the exclusive purchase of a new technology, paying an initial higher price for an item which is then fixed for (say) five years to provide the buyer with certainty and paying a supplier early to assist their cash flow and guarantee supply.
The second internal area where selling skills are important is leading the category and spend review. In this process there is a need to target procurement categories where effective gains can be achieved. However, there is a good chance that affected departments have different ideas; so it is the role of Procurement to convince all parties that the selected categories will provide substantial benefits for the business.
Procurement sells to selected suppliers
With knowledge of the business strategy review and the work put into the category and spend review, Procurement is better placed to sell to suppliers. But you say, Procurement is for sourcing and buying; but getting the best deal depends on how you go about the buying process.
From the supplier’s perspective, the overall procurement outcomes should be attractive for their business as well as yours. This approach to the supply market is called ‘supplier preferencing’. It requires Procurement to identify business opportunities, including investments mentioned earlier and sell the benefits, initially to your company’s executive group and then to selected suppliers. This can definitely be a win-win outcome, with Procurement as the selling party!
If you as the buyer has no interest in developing a supplier’s business, then why should the seller (the supplier) bother to sell the benefits of their offer to you. When this is occurs, the the deal just becomes an ‘I have – you buy’ arrangement and the ‘investment’ opportunity may go to a better prepared competitor!
So, to be a successful procurement professional, improve your selling skills!