We were at the Venetian conference center in Las Vegas, finishing up the debut presentation of our big research program on the future of procurement, when a guy handed me his card: Dominique Gaillard, Verizon’s vice president of financial operations.
Why would a finance executive be so interested in procurement?
Because the relationship between procurement and other functions—and with suppliers as well—is becoming more collaborative, and for that collaboration to pay off it has to be rooted in a strategic vision that is shared across the entire enterprise. As Dom put it in a follow-up phone call, “I was really curious to see what is out there from a best practice point-of-view and how finance can work better in the procurement world.”
Our research shows that procurement increasingly is defined by both collaboration and business strategy, and also points to the crucial role of technology in facilitating this collaboration, both internally and along the supply chain. And it shows that companies with robust revenue growth are more likely to emphasize the role of collaboration.
Yet true collaboration is not always easy to achieve. “The challenge was not as much being collaborative from a ‘let’s build a relationship’ perspective, but getting our mindset in a different place around what we are actually buying,” says the chief procurement officer of a large US financial services company. The payoffs, though, can be substantial.
Inside the firewall
At Verizon, finance and procurement team up during talks with suppliers in order to optimize cash flow. “We have common objectives and our teams work very well together around things like supply chain financing,” says Dom. “There are things we cannot do without them and they cannot do without us, so that collaboration is actually quite key.”
Our survey data suggests that good internal collaboration makes a difference, with a sizable majority of executives at companies with the highest growth expectations agreeing that procurement is becoming more collaborative with other parts of the business.
Lack of collaboration, meanwhile, comes at a cost. Tim Thomas, head of procurement at big meat-packer JBS, says his company is unable to tie together the diverse purchasing operations of its global parent. “It is something that we need to do if we’re going to continue to improve and drive the value that we should as an organization throughout the entire world,” he says.
Vendors, technology, and risk
Collaboration with suppliers is also growing—and growing more sophisticated. A great example comes from the owner of the Venetian, Las Vegas Sands Corp., which is working with a major lighting vendor to create more efficient products for its vast casinos—work that will pay off for the vendor as well when it goes to market with a better offering.
Technology plays a key role in making this new era of collaboration possible. Business networks—rated in our research as a major trend—tie partners together, while social platforms turbocharge communication, automation smooths processes, and mobile tools give people on all sides of a relationship unprecedented flexibility.
There are costs to all this—collaboration takes time, and may introduce risk—but it was the upside that had the room at the Venetian buzzing.
Key statistics from our survey
- Benefits of a more strategic, collaborative procurement function include cost savings from new initiatives (according to 60% of executives), better management of supply risk and compliance (57%), achieving competitive advantage (55%), and driving additional revenue (45%).
- Business networks are the top global trend expected to have an impact on procurement, other than macroeconomic factors like globalization and commodity prices.
- Executives at companies expecting robust revenue growth are more likely to say procurement is becoming more collaborative, that it is increasingly embedded in other parts of the organization, and that procurement data is being used across the company.
Edward Cone is the technology practice lead and deputy director of thought leadership at Oxford Economics, where he has overseen research programs on topics including cloud computing, the Internet of Things, and global talent trends.
The Oxford Economics Future of Procurement research program includes surveys of more than 1,000 procurement executives and employees around the world, along with personal interviews with leaders in the field. For more on the future of procurement, download an executive overview and infographic.