Procurement teams at large firms around the world frequently fail to save as much money as they should for their companies. This can result in up to $14 million in missed annual savings for the average-sized large firm, according to CEB data.
Procurement teams also tend to think that the best way to help line managers and other business partners save more money is to get involved in the buying process at an earlier stage. For instance, they might seek to show business partners how much they know about a particular category of spending (on specialist freelance auditors, say, or on business travel services) and how to use their skills to find bigger savings.
But this approach is misguided. CEB research shows five reasons why early involvement is unlikely to happen.
Few business partners want early help from Procurement: Just 21% of business partners want help at the beginning of a purchase, according to CEB data, while the rest are interested in Procurement’s help only later on in the process, if at all.
Interestingly, their stance doesn’t stem from a poor opinion of the procurement team’s services, as both business partners who want Procurement’s involvement early and those who want it later in the process share similar opinions of the function. This means Procurement’s efforts to communicate how valuable they are won’t necessarily help them get involved earlier.
Business partners don’t think Procurement works fast enough: Sixty-five percent of executives told a CEB survey that the speed required to deliver business results has increased (see this post for more on the phenomenon) and, unfortunately, business partners selected the word “slow” as one of their top three to describe Procurement.
Predicting the need to buy something is hard: Just 17% of procurement professionals said they had a good understanding of their business partners’ buying needs over the next six months.
This is in part because business partners themselves often don’t know: only 55% of them said they typically know what types of purchases they will make over the next six months.
Procurement staff don’t have the capacity to take on more projects: If Procurement was able to get involved earlier in more buys, the function would have significant additional work to do to manage these buys.
Fifty-five percent of procurement staff say their teams haven’t got the resources to meet current needs, much less any influx of new work from the business.
Procurement employees rarely have the skills to make a difference even if they did get involved earlier: Helping business partners through early involvement requires three abilities: an understanding of the business’s strategy, expert application of the procurement process, and collaboration with stakeholders to get the deal done.
But, since only 26% of procurement staff possess deep knowledge of business and supply chain partners’ priorities, 35% of them have expertise in procurement processes and internal policies, and 26% of them excel in establishing relationships with others, it’s unlikely procurement teams would succeed even if given the chance.