Time to call the shots

Whether you're too busy putting out fires, dealing with immature suppliers or organisational politics, as today's procurement managers your role is much bigger and more important than ever before, and it's time to take charge. You're no mere stagehand and as far as movement of goods go, the buck stops here. ANGELINE YEO finds out how you can take advantage of the spotlight and avoid moving back down the corporate ladder.

Everyone knows the stories. Procurement in a dusty back office. Pushing papers, penny pinching and generally hated by anyone who was unable to circumvent procurement's policing when all they wanted to do was buy a couple of pens.

Then a few years back you started seeing procurement professionals getting recognized in their organisations for their exceptional buying breaks, rescuing bottom lines and helping their corporation get a larger slice of the market through pro-procurement practices.

Internally, people started to respect the purchasing department, and purchase order forms were less grudgingly filled out.

Since its old transactional, law-enforcing days, the procurement departments in some organisations have evolved and now wield having enough power to execute bold strategies that could make a real difference to a company's bottom line.

Part of the significant change in the procurement function is its present ability to have

a better handle on the direction of the business [strategy] and integrate spend and cost management solutions. Even 3-5 years ago procurement was too reactive in its execution focusing on front end deal making and robust contracts at the direction of stakeholder wants and not so much on the businesses requirements, says Mark Sparrow, director of Asia for Jigsaw Search, an executive search firm specialising in the procurement, supply chain and business transformation space.

Sparrow observed that since then, procurement has taken a significant few leaps to being able to understand the business better, thus evolving and boosting procurement's standing in organisations everywhere. "Flexibility has become key in the mindsets of today's procurement professionals," he says. "Businesses have started to understand the concept of commercially flexible contracts that have real world delivery throughout lifecycle.

"The function has now opened the lines of communication through the business," he says.

More importantly, the procurement business has evolved from supplier-squeezing to adding value to the entire corporation as a whole, making them an invaluable part of the company, says Ramesh Krishnamoorthy, director of technology outsourcing and professional services for Asia and Japan, global supply chain services at Hewlett Packard.

But perhaps it is John Paterson, CPO of IBM who articulates it best as to how the buying function has changed and why procurement is, and should remain second only to the CEO.

"The role of the buyer function has continued to drive value and gain visibility at the top of the corporation. Few organisations are as impactful to the company's bottom line as procurement, which negotiates the costs of the goods and services we procure in support of our revenue stream, and average payment terms which generates free cash flow," he says.

What's in a name?

Unfortunately, procurement organisations that are able to pull their weight in the office are few and far between in Asia. For some procurement professionals, the idea of the dusty cubicle out of sight is still a reality.

How out of sight are we talking about? Try doing all the work a buyer would, but not having a purchasing or procurement title.

Having the proper title means a buyer's job requirements are properly demarcated, a simple corporate strategy that can have a signify cant impact the employee's general attitude towards his work.

Further, having the ‘procurement' title means buyers have more clout with suppliers and fellow colleagues. A buyer from an SME, who wishes to remain unnamed, once said that striking deals with suppliers was particularly difficult, especially when these suppliers were used to the procurement title and tended to raise an eyebrow at anything less. Getting respect as a purchasing department from colleagues within the organisation was also a nightmare, without first the procurement title and second, the bosses' backing. Reading about buying boffins executive effective cost saving strategies was a "distant dream" to these professionals, who were stuck and disgruntled in what they termed "pencil-pushing jobs". The  general advice to these professionals is to prove their worth to the management and while that seems logical, the reality is that it is not as easy as it seems.

Krishnamoorthy believes a large part of why some procurement organisations are unable to move up the ranks is because they're too busy putting out fires with their suppliers.

Because of Asia's comparatively immature supply base, many procurement organisations find themselves limited in how they can execute a good strategic sourcing strategy - something that has become the norm in other more mature procurement organisations.

"There are many countries that are still struggling to consolidate and standardise," he says. "You end up not having that kind of competent supply base that can be your sole service provider and take on the critical mass from you.

"I feel that if you have a supply base that is very mature in its own way then the capability that is built inside [the procurement organisation] is to cope with the maturity, so you're kind of evolving your own standards. But most of the time, you are grappling with an immature supply base which then means your own evolution gets hampered. "You're putting out fi res instead of doing something really big or constructive."

Back to pinching pennies?

Fighting fires seems to be top of the agenda for procurement professionals today, especially with added pressures from the boss to preserve breaking bottom lines.

The fear however, is that with this added pressure, procurement will see themselves leaving their strategic plans behind in favour of returning to the way procurement was before - transactional, pressuring suppliers for lower prices and turning stones over for loose change.

Our experts too, agree that there is a possibility this might happen, but are unanimous in their objection to let years of fi ghting for visibility go down the drain.

"At this point in time there is a sudden importance being given to procurement, and it is to [drive cost savings]. But it is very unfortunate. There should be a need for procurement in these times to be more creative and not do this [penny pinching]," Krishnamoorthy says.

He believes that while this may happen, it will only be a stop gap measure and will serve to the detriment to the organisation as a whole if continued. "Th is is a consequent reaction of a recession, but there will come a saturation point, perhaps in six months or so," he says.

Sparrow too, acknowledges that in light of cost saving initiatives, procurement may find themselves slipping back into its old supplier beating ways.

"Procurement will of course always be expected to deliver cost savings and to change this status quo is unrealistic. Acknowledging a broader career path and solution delivery as part of the cost cutting measures is however, key."

He believes that going forward, there will be more focus on micro strategies that fit within regions, on delivering long terms strategies that drive longer term sales and sustainable long term rewards to investors rather than short term strategies that cause complications over time. "And when that happens, procurement will have a better footing [in terms of their standing in the boardroom in Asia]," he says.

While procurement is perhaps the best to save the company when sales revenue figures are not up to scratch, organisations who rely on procurement solely to cut costs are not making

full use of what procurement can do, if they were given the chance.

Paterson on the other hand does not think procurement's role will take any steps backwardduring the downturn, but urges buyers to be proactive and recognise that a recessionary soft market also translates into opportunities for buyers.

"We need the procurement function to take advantage of strategies in a buyers' market, where sellers are more willing to be aggressive with pricing and terms in order to fi ll capacity and maintain revenue streams," he says.

However, the success of these procurement individuals has to come with years of experience and good processes that should already be in place, he says. With this, procurement will become invaluable to its organisation.

"Procurement effectiveness and our ability to execute in tough economic times rely on the foundations that have been built on mature processes, supplier relationships and contract management strategies.

"Once a company has matured and procurement's role has been moved up the value chain as an influencer and contributor, it would not be logical or financially healthy to give up the competitive advantage that a strategic procurement function can deliver," he says.

Paterson believes that the economic situation has turned the spotlight on what procurement and supply chain professionals can do - it is now that it's deliverables of effectiveness, efficiency and overall execution will become the backbone to eventual financial success of any company.

Regional manager of Southeast Asia, Hong Kong and Taiwan at Hewlett Packard's global supply chain services division Calvin Ngo agrees that procurement has suddenly been given a leading role in the company.

"Procurement's role may be elevated inevitably because sales are not meeting their targets and so many CEOs are watching bottom lines," he says. "From a job market perspective, people are re-looking into the procurement organisation again, especially in the financial sector, to put in place more controls."

Get creative

Ironically, it could be the market conditions at the moment that will give buyers the say they have been fighting for over the past few years.

Now that procurement is back in the spotlight, all attention is turned to procurement leaders who should step up to the plate and show management what procurement can do. The best way to get your bosses' attention? Get creative, our experts say.

"I think this is going to create a lot of opportunity for procurement to be very creative.

This is because the options are going to be very limited moving forward for buying organizations as well as the suppliers," Krishnamoorthy says.

"There will be more strategy, and more analysing in the procurement function in Asia," says Sparrow. "Asia is accelerating very quickly and while we have approached a significant blimp, the progress is still there and will continue to be there. And when that happens, procurement will have a better footing [in terms of their standing in the boardroom in Asia].

"Unfortunately, many procurement managers, while stellar at managing categories, may be less than equipped to handle more strategic procurement activities, much less think up creative way to

Paterson says IBM understands the need for constant skills upgrading to keep its world class procurement team in tip-top shape, and thus has in place a variety of educational offerings and career advancement programs. The company is also conscientious in spotting and selecting individuals with potential for senior leadership positions, and providing each with a tailor-made career path focusing on global and cross-unit exposure and senior executive career mentors.

"Buyers need to understand the corporate and supply chain strategy, plan their career roadmaps and act by taking advantage of my raid tools and resources made available for skills enhancement and development. Leadership and collaboration skills will continue to be important attributes supply chain professionals need to develop," Paterson says.

Grow a pair

Being fully educated is one thing, but procurement managers looking to advance up the corporate ladder should ideally have top management buy-in, and if they don't, they should pluck up the courage to ask for it.

But this entrepreneurial spirit is lacking in many procurement professionals in Asia.

"We have never expected procurement to walk into the CEO's office and tell him, ‘listen: I want an embargo on a particular spend'. That part of the leadership has never been expected out of a procurement leader in any organisation," Krishnamoorthy says.

Ngo concurs, adding: "Most procurement professionals are great at their work in different category specifics. But are they ready to stand in front of senior leaders? That is a different question.

"The pair of procurement professionals have had the experience streamlining HP's spend with the buy-in of HP CEO Mark Hurd, who takes an active interest in the department's activities and personally has a conversation with the head of procurement every two months on the status of the department's activities.

When top management has that much faith in a department, it automatically elevates the status of the department within the company, lending the department more clout to carry out larger, more strategic plans to grow the company.

With management buy-in, procurement officers at HP are better able to negotiate better win-win situation deals, instead of just bowing to their client's requests like they used to have to do.

"I have gone into heads of businesses and said: ‘stop doing this'. And if the company insists on doing it, I would tell them, come along with me to Mark Hurd, because as far as we are concerned what you are doing is not in the interest of HP as a whole," Krishnamoorthy says.

"That is how I would defi ne the evolution: That procurement organisations attain that kind of say. Nobody will serve that position it to you, you have to proactively take it. That is probably where procurement is moving toward in many organisations."

Pummeled the supplier? Pat on the back

One possible reason hindering procurement managers from getting on the CEO's radar screens for a job well done might be because of the current KPIs set on procurement managers today.

While the market has evolved drastically over the past few years, it is appalling that procurement's KPIs have hardly changed at all - many are still measured on amount saved and little else.

In a difficult trading environment, where managers are hard-pressed to find innovative ways to drive savings, our experts believe it is time to shake buyers out of their comfort zones and set the bar higher than what they've been used to.

"The more aggressive your targets are, the more entrepreneurship opportunities arise," Krishnamoorthy says. "Speaking from personal experience, if I have a target that is really huge, the only way I will meet it is if I challenge the system that I am in."

Of course, meeting savings target is not the only way to measure a procurement manager on. What's more important, the HP executives believe, is to measure, or reward buyers who make attempts at improving the way they source and buy, or those that challenge the business decisions that will have an impact on the total overall spend on the company.

"Nobody has included that in their stakeholder relationship, procurement managers have to question, reason and, if need be, shape what these stakeholders are doing," Krishnamoorthy says.

"You have a responsibility to your own function. Stakeholder relationship is not becoming a goody two-shoes and doing what the stakeholder tells you to. That, I think, is the change that has to happen."

So while CEOs are still going to set seemingly impossible-to-reach targets, the aim of the game for procurement professionals now is to achieve these targets by creative means, even challenging processes that have been put in place for ages, and not just squeezing the supplier for the best deals, our experts say.

Until and unless procurement takes that proactive step toward elevating itself within the organisations, procurement is either going to stagnate in their roles or worse, go back to being invisible.