Understanding the Synergy of Culture and Procurement

May 12th, 2014

How does your company’s culture shape your procurement practices?

Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing.

The follow-up question to the one above could be, “Do you even KNOW what your company’s culture is versus what they intended for it to be?”

I recently attended a local ISM meeting where the guest speakers from VAP Packaging did a terrific job (with a number of their team members) explaining the importance of culture not only within their organization but for other organizations as well.   The culture they have developed has empowered their entire team with the confidence to think outside the box and a system or rewards when they do so effectively.  It was impressive.  For a long time, the culture of a company and how that company handles its supply chain have not always been on the same page.  Unity and Teamwork are preached to operations while procurement is still told to SAVE MONEY and CUT COSTS.

Opportunity not just Order Taking – As procurement professionals we are tasked with assisting the business to run more smoothly, to help save money and to help foster business partnerships that will grow the company.   In many companies this translates to “Rick, I need a million widgets.  Go get me some quotes and samples of the best ones out there.  After we decide what we want you can beat them up on price and write up the contract.”   While this does provide some value to the organization by freeing operations time to do what it needs to do, it does not account for the fact that maybe “Rick” could have presented 2 new options to the business that switch to “dongles” at half the cost, half the volume and can improve operational efficiency by 25%.   Not all companies will embrace outside the box thinking from its procurement team so understanding where the current culture stands is an important part of improving that.

Value of cost reduction – There are so many times people get enamored by the numbers.  They hear about a solution or product that has an ROI of 5x in 6 months or that can generate $500,000 in savings, and they instantly seek for ways to implement that service or bring that product into use.  What can be ignored in the process, is the fact that by introducing this new product that is going to save $500k to operations, internal procedures and personnel must now change what they are doing, resulting in a drop in efficiency of 40%, costing the company $1M over 9 months.  There can be a cost of change to achieve savings and understanding the pressure points with the organization is critical to weighing the value of a new change.

Understand the Relationships – Many professionals will see this point and think “See, don’t mess around with the vendor relationships I have spent years developing.”  This is not saying that.  The point being made here is to understand completely what relationships are currently in place so that they can be reviewed for improvement. Partnerships can be good.  They can provide security and assistance in emergencies and they can help strengthen companies when the fit is right.  Partnerships are not always good when they are defined by “I have been doing business with Jim for 10 years and he has never let me down.  I am sure he is giving me the best prices he can give me.  He even stops by once a month to take me to lunch where I hardly see other vendors.”  These types of relationships have the tendency to cover years of price increases and terms that have benefitted only the vendor.  Understand the relationships in place so that facts and research can be done to either challenge or support the value they bring to the organization.

At SafeSourcing we understand the value of understanding your company culture and have been doing it for our customers to help them effectively structure projects for years.  For more information on how SafeSourcing can assist you or on our “Risk Free” trial program, please contact a SafeSourcing Customer Service Representative.  We have an entire customer services team waiting to assist you today.

We look forward to your comments.

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