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Collaboration as a procurement strategy

In the majority of cases, best performing organisations are generally in agreement that profitable commerce begins with smarter procurement strategies culminating into mutually aligned gains and benefits for all organisations. In such set ups, procurement practitioners are expected to wear more than one hat which includes the hat for a corporate leader, supply chain manager, account relationship manager, risk control manager, service advisory manager, working capital manager and marketing manager. The procurement practitioner will be required to ensure that business processes and functions are converging around values of shared collaboration. As the role of the procurement practitioner continues to mature in the majority of business organisations, greater expectations of what they are able to bring to the collaboration table are born.

supply chain with CHARLES LOVEMORE NYIKA

Industry researchers strongly believe that as procurement practitioners are given their seat at the cross functional table, with their knowledge of the constantly evolving supply chains, their role in the process of cross functional collaboration is pivotal. Since the procurement department interacts with all the departments, they are best placed to take a leading role in co-ordinating cross functional collaboration efforts within the organisation. Industry observers further argue that “aligning functional objectives across the organisation ensures all functions are pulling in the same direction so that the gains in one area do not wipe out gains in other areas of the organisation.”

There is an accumulation of recent evidence which suggests that in organisations where spend cultures are not cross functionally inclusive, many executives and senior managers are more often pre-occupied with “empire building” tendencies and will always take pride in growing their budget numbers with a view to enhancing their perceived status within the business. In such business environments, one user department’s preferred supplier could be another user department’s problem supplier. Procurement can therefore be instrumental in creating cross functional harmony in that as a neutral internal service support department, it often helps cut through internal politics which hinders business growth.

For cross functional collaboration to be effective, the procurement department must act as a unifying force by co-ordinating supply chain activities in a way that serves all constituencies within the four walls of the business and in some cases beyond. Cross functional collaboration will be effective in serving the interests of all stakeholders in situations where the knowledge of market dynamics by other functional departments to include finance, procurement and production dovetails the efforts of the marketing department who ordinarily happens to be on the market frontline.

In organisations where the concept of cross functional collaboration has found a home, the procurement department does not start running around sourcing for goods and or services when the requisition is submitted. That approach does not work in today’s fast-paced environment. With the support of cross functional teams, procurement personnel are therefore required to up their ante by understanding business priorities instead of taking procurement requests at face value without understanding how requested materials will impact on the achievement of organisational values. Procurement practitioners should not be preoccupied with spending less and less but should be preoccupied with spending wisely while promoting the overall broad-based strategies for achieving shareholder value. It does not always follow that spending cheap will enhance both the top line and the bottom line. Working with user departments to identify reliable suppliers is key.

The new philosophy in procurement is no longer inclined more towards cost reduction but it is leaning more on effectively working with budget owners, departmental executives, suppliers and customers — internal and external. Cross functional teams typically meet regularly to critically analyse all cost structures, whether good, bad or neutral and then make a conscious effort to systematically target cost drivers and value drivers while re-investing savings into the business whenever necessary. However, in organisations where the “silo mentality” is ingrained in the organisational culture, cross functional teams rarely meet and there is no regulatory framework to put a brake on maverick spending since big spenders of goods and or services do not want to channel their purchase requests through procurement, causing serious financial leakages. Cross functional collaboration strategies can often take care of such problems, enabling the business to move forward progressively.

Cross functional teams by their nature can be regarded as a source of significant savings in that internal collaborative workshops can provide a platform to brainstorm a variety of cost reduction initiatives which could improve production management processes, suggestions for alternative cheaper substitute raw materials and effective asset utilisation methods. Business people oftentimes spare scrutinising their core business processes, often missing prime opportunities to shed significant layers of cost and duplicate functions. With full cross functional co-operation and collaboration where all departments work together for a common good, there is bound to be supply chain wide visibility from the work floor to top floor, thereby creating a flexible and agile supply chain management.

Cross functional collaboration is also very important for facilitating inventory management optimisation. Where there is a meeting of the minds between procurement and marketing for example, there is always a balancing act and some form of equilibrium between logistics costs and customer service fulfilment speed and making sure there is a proper balance between inventory costs and loss of goodwill, current and future. Apart from loss of goodwill, late delivery of goods will present unearned opportunities for the market entry of rival products in the market.

Although cross functional collaboration strategies are instrumental in the promotion and enhancement of an interactive network culture in corporate conversations and have been used to greater effect in some organisations, it would appear current results remain a far cry from the theoretical value proposition. There is a tendency to have a fragmented approach where each department does its own thing and then hands over the process to the next function, which in essence is time consuming. Concurrent business collaboration holds tremendous promise as a solution to such fragmentation. This will allow cross functional teams to have an all-inclusive company wide outlook which will focus more on the front end of the supply chain than the back end.

Charles Lovemore Nyika is a Supply Chain Practitioner based in Harare. For views and comments he can be contacted on nyikac@yahoo.com

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