Evolution of Procurement from Tactical to Strategic

As a procurement professional, what is your role in your organization?  Is it to run RFPs, negotiate vendor agreements and drive savings?  Or is it to manage vendor relationships, drive compliance and advise various business unit leaders?

Ultimately most procurement professionals summarize their role as delivering value to their organization.  Such value has traditionally been measured in terms of dollars saved which has led procurement towards a very tactical set of behaviors.  Running RFPs, negotiating contracts and driving savings are all tactical activities solely focused on arriving at a low price.  But what about activities that would include managing vendor relationships, driving compliance and advising business units?  Most procurement professionals would tell you that these activities are much more strategic in nature, driving value far beyond that of negotiating to a low price.

So if we acknowledge that there is both a tactical and strategic side to the procurement role, the question is how to balance both.  In reality, a procurement professional’s ability to contribute is going to be initially measured on the savings they deliver.  Without savings the professional is not able to justify working on the strategic items they believe will in fact deliver more value than the tactical.  In essence they must earn the opportunity to work on the strategic by delivering on the tactical side of the role.

What we conclude is the procurement professional must find highly efficient ways to deliver price value so they can create time to work on the strategic.  Hiring consultants or outsourcing procurement initiatives can create some bandwidth but ultimately take time and effort to manage.  However organizations that have a portfolio of existing contracts for use by their clients or “members” typically provide price value with immediate savings at very low effort on the part of their members.  Group purchasing organizations are an example of such companies.  They provide immediate savings through existing contracts which have typically been negotiated by aggregating spend across many companies to deliver price value that an individual company could not attain on its own.  That value will solidify a procurement professional’s tactical role and earn them the opportunity to contribute in a much more strategic manner.

James Hallock

James Hallock

CoreTrust VP Development