The Power of Procurement - Taking a more strategic role 

Richard Nixon, Partner, KPMG in the UK: We conducted one of the biggest global surveys into procurement functional excellence and what that means. The exciting news is that we found from that that even in an economic environment where there’s lots of opportunity for procurement to drive benefits for the business, there’s even more opportunity for procurement to play a bigger, strategic role in helping businesses address cost, cash, and risk as they develop and face the challenges of today and tomorrow.

The need for procurement to take a more strategic role:

Samir Khushalani, Principal, KPMG in the USA: Procurement functions typically struggle to take a more strategic role because they are hampered by the available capabilities and skills in the organisation. Part of this really has to do with how the procurement function has evolved. It has traditionally been more of a back office transactional function, that hasn’t really been known for or expected to deliver value as a strategic business partner to the business. And consequently, they are considered more paper pushers and folks who just, you know, cut purchase orders etc. And that in itself is, you know, limits procurement’s ability to actually be a deliverer of strategic value.

Ray Slayford, Partner, KPMG in Australia: I think procurement function sometimes struggle to take a more strategic role at the corporate level within a board or executive level. That’s often driven by where they sit within the organisation. So often the procurement function or head of procurement will sit as a direct report to another executive or board member being the CFO is the principal area. I also think traditionally procurement is seen to deliver tactical annual targets, not necessarily strategic cost out targets. So I think as procurement moves up its maturity, and increases its profile both at an executive and a board level then it’s moving to more strategic nature objectives and strategic initiatives helps elevate the profile but also deliver different outcomes for the organisation.

Frank Mikkelsen, Senior Manager, KPMG in Norway: I think that procurement are struggling to take a strategic role because procurement is, to some extent, very focused on procurement processes. But I think procurement has to focus more on the business strategy and corporate strategy. When they can understand what a business is doing and how they can contribute and show that they can contribute good value to the business, I think they would take the next step too on the strategic level.

Richard Nixon, Partner, KPMG in the UK: I think one of the challenges for procurement people is that they are steeped in their environment. They are very much focussed on cost reduction. And that quite often they’ve spent all of their career within that function. So they fail to see the broader business agenda. We did some research three years ago that highlighted that C-level executives know there’s value in procurement but they believe the procurement people don’t really know how to market themselves and to put that value across to the business. So there are lots of challenges that procurement people need to overcome. They need to learn to talk the business language. It’s better to save 50 and be able to demonstrate that all of that 50 has tipped into the bottom line than to go along CFO and say, “I’ve saved 100.” And the CFO say, “Well, I can only see 30.”