THE BUSINESS REVIEW FOR PROCUREMENT LEADERS
CEOs do not instinctively know of the competitive benefits that arise from collaborating with suppliers. This leads to a vicious circle where procurement finds it hard to justify investment in the function and hence underachieves.
In an attempt to break this circle of ignorance, the author proposes a simple “roadmap” that illustrates the relationship between management support, the degree of procurement competence, and sustainable business benefits.
It has four stages of evolution in terms of supplier relationships. Stage one is about basic price reduction. Stage two, supplier cost management, sees “should-cost” discussions taking place with suppliers. Stage three, “collaborative total cost of ownership”, requires disclosure of future plans, objectives and targets and a high level of trust between buyer and supplier, and is rare even today.
The fourth, and final, stage, “competitive value and supply chains”, signals true integration between companies. At the moment, it is restricted to parts of the automotive and aerospace industries, but it will become an option for others in the future. In this scenario, procurement becomes a key driver of competitive advantage and a catalyst for new alliances.
