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Is Purchasing REALLY Valued in Your Organization?

We could poll all of our procurement community to find out your opinion on this topic: “Does your organization value the purchasing function?”  However, it would be a worthless survey, because you aren’t the right people to ask…..of course you value your own function. We can’t rely on internal end user/customer surveys either, because those are no indication of strategic value either. 

What you should really care about is how the *executive staff* perceives and therefore values purchasing. That’s the opinion that counts most, because they decide how much headcount and budget you receive, and they also determine whether your organization simply helps to keep the business running or if it is to be harnessed to deliver corporate strategic advantage.

Competitors View has put together a list of questions that we want you to ask.  Pull out your best mirror, because we want you to be as honest as possible with yourself. Here are the mission critical questions you need to be asking yourself and your purchasing organization leaders right now:

  1. Does your company have a Chief Purchasing Officer (CPO)?
  2. If ‘Yes’, does this CPO report to the CEO, COO, or President of the company? Or is your highest purchasing authority tucked away under some obscure function?
  3. Does your CEO’s annual report to stockholders include notation of purchasing department strategies and results, noting the purchasing organization’s contribution to corporate profitability, along with forward looking procurement strategies to deliver corporate competitive advantage in the marketplace?
  4. Do your internal end user and customer groups reach out to purchasing not only when the demand is being generated, but FAR earlier, in the research and design process – to ensure up front design for TCO?
  5. Is your purchasing department viewed and treated as a service provider like finance, HR, IT, accounting, payroll, and legal or as it treated as a value added center of profit like the sales function?
  6. Does your purchasing department allocate enough discretionary budget for advanced and ongoing training as an investment in performance results and corporate profitability that keeps purchasing just as well equipped as their sales negotiation counterparts, who spend up to 20% of their time in training?
  7. When there is belt tightening in your company, is purchasing one of the last groups to get headcount and budget cuts, such as with the sales organization? Or are you among the first organizations to get headcount and budgets slashed?
  8. Does the CPO measure not just cost reductions (which often just push supply chain costs back to the supplier) but also place tremendous emphasis on taking costs OUT of the supply chain – and track and report those results out to the C-Suite as well?
  9. Are there hard and fast policies from the top that discipline rogue business units for bypassing purchasing (just as there are for violating HR and Finance policies, for instance), or does the company justify such actions by saying “getting products out the door is our top priority and you need to stop being a roadblock”?
  10. Does your highest purchasing authority report purchase contributions to earnings and profitability (gross profit, EBIT, etc.) to the C-Suite (the CEO’s executive staff) on a regular basis?  Or are they just reporting cost savings….
  11. Does the CEO of your company REALLY understand purchasing’s contributions to the bottom line, or does s/he think “if you are saving me this much money, why don’t I have that much left over in my aggregate budget?”

So how did you score?  Better or worse than you thought? We are guessing pretty bad. Don’t get down about it – this isthe state of the union.  It’s all upside from here; we have some great opportunities in front of us.

It’s not enough for your organization to generate great results, and it’s not enough for your organization to value and reward itself.  It’s not even enough for your end users to value and reward purchasing. That’s 20th  century excellence, but not here and not now. Not anymore.Our profession has too much impact on corporate profitability and strategic advantage to be satisfied with simply being viewed as a very good service provider inside the organization. That’s not us. 

If our profession is to both BE and BE PERCEIVED as a value-added center of profit, then all the areas above need to be happening.  Make it happen.

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