How to “Right-Size” Procurement to Align with Business Goals
Do you envision building a “world-class” procurement department? There’s nothing wrong with that. But before doing that, it’s even more important to recognize which stage your business is in—and the needs that you’re supporting. Regardless of the stage—whether start-up, growth, or mature—it’s up to procurement to deliver support and value that aligns with the core business goals and objectives.
Most businesses follow a growth pattern called the “S curve.”
In the beginning, everyone works to get the business up and running. Procurement helps wherever possible. As the business starts to grow, the slope of the S curve increases. It gradually gets steeper until it levels out after reaching market saturation. At the top of the curve, the business has two choices: innovate and thrive or stagnate and die.
As the business matures in these later phases, it’s up to procurement to evolve and grow, too. Unfortunately, a procurement department that is disconnected will hold the company back during this crucial stage of growth and innovation. This is where procurement professionals must be able to swiftly pivot and adjust their approach when working with business units in significantly different stages.
Where Is Your Business on the “S” Curve?
Business leaders don’t often bring on a dedicated procurement person during the startup phase. What they’re typically looking for from procurement is someone who can work in a chaotic setting, jump quickly between tasks, solve problems, and make sure bills are paid. A company at this stage doesn’t need a procurement expert who is focused on category management. That level of procurement just doesn’t apply to a company in the startup phase.
Often, businesses take a few years before bringing on an experienced procurement team. When a business is starting to cross over into the enterprise level, then it’s time to think seriously about a distinct procurement department.
At some point along the growth curve, inefficiencies will start to add up – especially when each department independently makes unplanned purchases. There’s a clear opportunity in this instance for a small procurement department to manage transactions and basic supplier negotiations. A higher-level procurement team should deliver cost savings and improved operational efficiency.
The best way for procurement to serve the company is by learning and supporting key business goals.
Align Procurement with Current Business Stage
The most sophisticated techniques are not always the best or the most appropriate for the business goals. To an experienced procurement professional, it can be easy to assume that the most advanced management methods, tools, and data are the most effective for a business of any shape and size. But that’s simply not the case.
If you’re at a startup, sometimes it’s best to cut back on the complexity of procurement. Be willing to take on tasks that procurement doesn’t usually do. Save those category management discussions for later. Soon enough, as order volume increases, it’ll be time to talk about controlled processes, systems, and supply chain management. At this stage, toward the middle of the S curve, your company will need procurement to help with the growth.
As your company expands, procurement can step in to help prevent issues with regulatory compliance and design workflows. By the time your company matures, you’ll have helped create a sophisticated procurement department that’s aligned with the business needs at each growth phase.
Stay One Step Ahead
In a rapidly evolving business, yesterday’s approach won’t align with tomorrow’s needs. Always strive to stay one step ahead so you’re prepared to deliver exactly what the business needs, whether that’s next quarter or next month.