Perspectives on Procurement

Transcription

1 Perspectives on Procurement Finance & Procurement: Optimizing Performance through Collaboration

2 In today s complex and fast moving world, Procurement and Finance must add value beyond base-level efficiency. How can these functions work better together to enhance business performance? It takes each of us to want to make a change. There is often the perception that Procurement doesn t know as much as Finance knows. This is a perception that constantly needs to be managed in order to be overcome. Together we can make the savings we all talk about truly visible For Procurement, moving up the value chain to become an integral player in business strategy and planning is critical to increasing strategic involvement this requires support from Finance. Procurement need to be able to demonstrate the value they can bring. We interviewed a number of CPOs and CFOs from leading organisations in the Middle East to hear their views and shared these early findings at Procurement Week MENA, a recent event in Dubai that brought together senior procurement leaders to share experiences and expertise. It emerged that the following are key to the success of Procurement as a strategic partner to the business: strategic leadership combined with the right level of capability team structure investment in technology process efficiency How does the wider organization view the role of Procurement? Operational leaders need to position their teams as critical to achieving strategic objectives; be it company profitability, strategic growth or cost reduction. Advanced operations management transcends daily business requirements and builds competitive advantage, going beyond a back office, cost-effective business enabler. It requires forward, innovative thinking and agile response to rapidly changing markets, technologies and global cost structures. Strategic minds lead to strategic outputs. To understand the positive impact they can have on the business, Procurement must be educated about their strategic role in the organization. Strategic sourcing, supplier relationship management, risk management and category planning are areas in which expertise is key within the team. Without such knowledge, the role of Procurement simply becomes taking orders and issuing POs characteristics we have often seen, particularly in the Middle East. Procurement departments that are structured in line with business needs can build stronger relationships across the organization, raising their visibility whilst building deep expertise of the specific marketplace. Showing pro-activeness in their approach to business requirements and optimizing opportunities for consolidation also builds trust within the business and demonstrates the value that Procurement can bring. Investing in technology can help elevate internal processes, whilst also improving the reputation of the business and its processes externally. For example a vendor relationship management system can help track the quality of vendors while also managing the invoicing process electronically. By providing Procurement with more data and insights into vendor performance, CPOs can spend more time on providing strategic advice to the business. In this edition of Perspectives on Procurement, we explore: How does the wider organization view the role of Procurement? Procurement s position in the organization inhibits their ambition Michael Wunderbaldinger, CFO Tecom Group How has Finance made the transition from a back office function to becoming a strategic partner to the Business, and what can Procurement learn from this? What are the benefits of collaboration between Finance and Procurement? Procurement is now on a strategic trajectory, but this requires the right talent Procurement is still largely transactional and does not understand the business There are two perceptions of procurement within an organization. There are those who see us as a threat because we are preventing them from doing what they want to do (e.g., stopping single source and exceptional approval, pushing them to use registered vendors) and those who are happy that we are doing procurement work they don't want to do. What are the barriers to collaboration between Finance and Procurement?

3 How has Finance managed to move from a back office function to become a strategic partner, and what can Procurement learn from this? Up until the 1990s, the Finance function was often viewed merely as bookkeeper. Today the CFO is often the CEO s number two. What was the journey that took the CFO to having a strategic role in the boardroom? What lessons can CPOs take from this to put themselves on the path to the Boardroom? To paraphrase Thomas A. Edison, success is 99% perspiration and 1% inspiration. Whilst Edison may have been referring to genius rather than success, this applies in any business setting. Investing the time to develop a deep understanding of the business, beyond the functional requirements of the Finance role, is something in which CFO s have greatly succeeded. Talking the language of the boardroom, getting involved as early as possible in the planning process and identifying opportunities to showcase their strategic ability throughout, are examples of ways of working that CPO s should apply. Lastly, but by no means least, using the data which is at their fingertips to provide the Business with meaningful insights on the performance of the business is instrumental in the value Finance has been able to add to its position. Working more closely with Finance, and with the right investment in technology and analytics, Procurement should focus on improving its ability to report on key metrics to Management. Providing valuable insights on money that is spent by the Business can help inform key decisions made by Management, both operationally and strategically. The CFO has made the time to engage with the wider business Ziad Bolbol, Finance Advisor DTCM We have leveraged the data we hold to show how we can improve performance Oftentimes, there is a perception that Procurement doesn t need to be a part of the process. There is often a sense that business needs to be in the loop, Finance needs to know it but Procurement can be brought in later. If we have a CPO with strategic sourcing experience along with a team of experienced procurement managers and foundation for the right procurement processes, it would make every department head s job easier. We have learned to talk the language of the CEO and the board Michael Wunderbaldinger, CFO, Tecom Group

4 What are the benefits of collaboration between Finance and Procurement? Savings Insights Delivers sustainable bottom-line benefits Provides more valuable recommendations and better demand planning Relationships Efficiencies Better understanding of vendor landscape Faster decision-making and less timely processes

5 Procurement and Finance should be like a married couple, where they support one another through the good and the bad times Michael Wunderbaldinger, CFO, Tecom Group The two functions sit on a wealth of data (historical & forward looking), which must be optimised It takes each of us to want to make a change. There is often the perception that Procurement doesn't know as much as finance knows. This is a perception that constantly needs to be managed in order to be overcome. Together we can make the savings we all talk about truly visible Ziad Bolbol, Finance Advisor, DTCM Without Finance it would be extremely difficult to implement innovative change. At the end of the day, it is about the savings. So if we can work with Finance to prove that the savings we make go to the bottom line, that is going to raise our profile. What are the barriers to collaboration between Finance and Procurement? Trust: Can Procurement do the job? Traditional mindset: Why should we change how we have always done things? Lack of communication: Do we need to talk to them? Quality of service: Will they add value? Threatened: If they have more information, will my Finance job become less important?

6 Conflicting performance measures and KPIs is the main barrier Anis Tabka, SVP Procurement, Du Procurement s current position in the organisation and current mindset (can work both ways!) PwC s global operations practice connects clients strategies with execution. We start with the premise that operations can and should be a strategic asset. There is an urgent need to evolve and progress the Procurement function from merely operational to strategic. Team capability and structure, business alignment, process efficiency and technology, all combined with strategic leadership, are at the core of this thinking. Finance needs to make Procurement more aware of the strategic issues What I have noticed is that if you ask the right questions, you can move from being perceived as operational to strategic. If you don't ask the right questions, you will just get stuck because Finance see us as processors then they will just give us processing work they don't want to do. Sometimes the way that the system is structured drives a wedge between the work that procurement can do and the work that the organization thinks procurement can do. Trust. A lot of times things are being done because they have always been done. 9 times out of 10 if you start asking the right questions and challenge in a respectful way, you can begin to visibly make a difference. Contact us for a more detailed discussion: Julian Thomas Partner Tel: julian.thomas@ae.pwc.com David Johns Director Tel: david.johns@ae.pwc.com If I share this with Procurement, am I giving up some of the control that I have? 2016 PwC. All right reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details. CDC/1180/022016