The concept of customer centric procurement is taking hold as businesses realize the function’s role as a strategic enabler of business value. For example, at the 5th Procurement Strategy Forum, supply chain and procurement experts from across industries discussed on the importance of customer centricity.
Sustainable procurement strategies, driving innovation, and managing risk were the focal points of the opening panel discussion at the forum. It was a privilege to be on the opening panel with stalwarts of the procurement discipline, but the moment of truth for me was when one of the attendees posed a thought provoking question during the Q&A session. The question: when a buyer has to choose between a more eco-friendly but costlier product, and a less eco-friendly but cheaper product, what is the right choice?
I believe the convincing response to this has to do with an organization’s adoption of business goals pertaining to sustainability and carbon footprints. These goals are defined by the expectations of the markets and customers the organization serves. If the procurement function and its systems do not connect the buying moment with the business goals in these two areas, it can erode business value. This means an organization’s spend becomes counter-productive and fails to deliver on the business objectives.
What customer-focused procurement really means
While sustainability and carbon footprints are two emerging examples, customer expectations are driving organizations to re-evaluate business goals in other respects such as innovation and supplier risk too. In our recent webinar EPurchasing Vision 2020: Greater Value Better Experience, guest speaker Duncan Jones, Vice President & Principal Analyst, Forrester, provided some valuable insights. One of our takeaways from his presentation was that ’customer-focused procurement’ is a dominant theme shaping the next-gen procurement function. The idea is that tomorrow’s procurement function must help employees perform their tasks more efficiently and effectively so that they are able to better serve their end customers.
Next-gen procurement solutions must support decisions and outcomes directly aligned with end customers preferences. Such solutions must be characterized by their ability to drive value through ’ease of buying’, effectively enabling employees to acquire and serve customers. Let us consider an example here – an employee has two options for buying a flight ticket to attend an important customer meeting. The first one is cheaper but the flight is at an odd hour. The other option is that of a costlier flight but one that allows the employee ample time to reach and prepare for the meeting.
Here the importance of serving the customer must supersede the need to control costs, emphasizing the fact that an organization’s buying needs must be tied to their impact on business outcomes. To support a decision that would serve business needs better, therefore, the solution should allow the user to opt for the more appropriately timed flight and provide a business justification. The solution should also incorporate agile workflows (for example, mobile enabled approval) for the employee to secure necessary business approvals in time.
Next-gen procurement goals must cater to customer priorities
Transforming current procure to pay (P2P) processes to achieve a customer-focused procurement function often begins with an organization’s adoption of a customer-centric business model, and defining clear goals around what this means for them. In this way, organizations having undergone customer-focused transformation are often able to align their entire value chain with customer goals. For instance, a leading Canadian supply chain solutions organization had ‘improving customer value’ as the core reason for its P2P transformation and was able focus on to simplifying the entire buying process to realize greater efficiencies.
Similarly, an international hypermarket chain has geared its procurement needs towards their core proposition of providing fresh food. By ensuring easy online collaboration and streamlined operations across its supply chain, including stores, distribution centers, as well as suppliers, this retailer stays focused on its customers’ needs and fulfills its core promise.
Customer-focused procurement also includes monitoring supplier performance with respect to customer needs, making the buying process agile and aligned with customer service goals, and empowering employees with the right support to make the right choices. For instance, if the nature of a customer’s business demands greater focus on compliance (such as safety standards), then the procurement function must ensure that the ability to enforce and monitor compliance is built into the buying process. For this to happen, procurement executives should be enabled to actively collaborate with suppliers, without hindering business continuity.
Compared to traditional systems, next-gen procurement solutions can thus ensure real time monitoring of important parameters and eliminate redundant controls. Intelligent automation paves the way for organizations to better service customer needs, realizing superior as well as sustainable outcomes.
It’s clear that for businesses, shifting to customer-focused procurement is no longer a question of ‘if and when’, but rather ‘how and how-soon’. Does your organization see customers as the most compelling reason for transforming the buying process?