«Savings is in our DNA»… Last week, I participated in a procurement webinar, where one of the industry leaders said that Slogan is a bright future milestone of the procurement function. When I read this, I think it appropriate to say that I decided to close the browser immediately. Procurement torchlight of 2017 and beyond – is not about savings. Savings is just a general description that you have of a business structure where you buy your goods and services not at the market price. It is some kind of professional fault when you have such savings-affected KPIs where you need to report your performance based on results in style «we could buy this expensive, but we negotiated to buy it at the market price.» Strange… Not? Mr. Trump would say: «Fake Savings.»
But let’s go back to the beginning.
Ok, what is our DNA? I see it as Innovation. Innovation is in the DNA of the procurement function. You cannot do something new, with the cheapest things or when you do not focus on transformation and change strategies. Our performance should be measured by value KPIs, what we change or what fresh insight we bring to the business? Ok, a question which you could ask me is — «Oleg, but how can you measure value KPIs?» And the answer is placed in another shape. Just think, why do we correlate Procurement function and Finance with regards to spend? Because, our initial savings approach gives us this sole source proposition. But let`s just believe that there are no more Finance department in business process, and with Finance gone, the function was acquired by robots or so… How can we measure this? Of course, we could have only one possible way — to compete with sales results regarding general performance. Once more, Spend is still under the control of procurement — we aim to build and control the tactical process of buying goods and services at market prices, but our general KPIs are placed on a Sales level, as opposite wing. More innovation, more sales. Easy.
Creating Value through Procurement