Savings have always been procurement’s main focus but with the business demanding more value where is the function looking for this and how is it measuring it.
Every procurement team is measured by the savings they make, but the business is increasingly demanding that they deliver value beyond just cold, hard cash. Where to look and how to measure that is key to success here, but as a CPO panel debate, hosted by GEP, at the World Procurement Congress in London concluded, procurement will always be ultimately judged on savings.
Capturing savings is the fundamental role of procurement and always will be
Matthew Bardell, VP at GEP, kicked off the debate saying that "savings are the fundamental role procurement", but added that the function is now being tasked with deliver value in other areas.
The panel of CPOs, which included Thibaut Eissautier of Diageo, Clive Rees of Fujitsu and Fried Walter-Muenstermann of BASF, nodded in agreement with Bardell’s initial sentiment but told those delegates gathered that there are many areas of value for the function to look at.
Fujitsu’s Rees was one panel member who was keen to stress the importance of his savings targets saying that he thinks about it all day every day. He added that he and his team would never move completely away from savings because it is what gives his team credibility.
Value can be delivered by through sustainability, supplier enabled innovation and talent management.
Eissautier started by saying that it was important to be focused on the areas in which you want to capture value. He said that at Diageo they focus on four goals - best cost, end-to-end value, innovative solutions and sustainability.
Fujitsu’s Clive Rees said that he and his team were looking to supplier enabled innovation to deliver this value and was currently working with suppliers to enhance their relationships.
BASF’s Walter-Munstermann said that sustainability was one area that his team was looking, and finding, value.
Measuring value can take many forms
Value can sometimes be intangible to try and measure, but it is of vital importance for procurement to find a way to measure what it is achieving.
BASF’s Walter-Munstermann told delegates that he has scorecards to measure what his team are adding, which are linked to the overall corporate strategy. Those achievements are also measured by his respective business partner rather than just in finance specifically.
Diageo’s Eissautier said that he uses capability frameworks. These take into account scale in terms of percentage spend with certain suppliers, turnover linked to supplier innovations and the percentage of the team that are continually moving round into different roles.
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This article is a piece of independent writing by a member of Procurement Leaders’ content team.
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