Return On Relationships
Does your procurement department make the news or report the news?
February 3, 2017
Jordan Early
1 minute

It’s time to start making the news.

Cost and spend analysis is, by its very nature, historical. You can only analyse and make decisions based on what has already happened which sadly, is too late.

Retrospective reporting would be great if we could be certain that the risks and challenges our businesses will face in the coming year will be the same as those we faced last year. Sadly, we all know that that is not the case. Cost is a lagging indicator, which means it is great for informing us what happened in the past (which is important) but it is close to worthless when it comes to predicting what will happen in the future and in determining how our organisations should react to these changes.

As the procurement function matures, teams are faced with a decision. To remain as a group that retrospectively reports what has happened within their business, or to get on the front foot and start producing insights and actions that can drive business strategy and deliver on business outcomes. The question is, do you want to make the news or are you happy to just break the news?

Teams that want to take the bold step from retrospectively reporting company news towards making decisions that have a direct impact on the future performance on their business needs to address relationships in a different way. Beating last year’s numbers is not a future focused business strategy. To remain relevant we need to look at future innovations and risks and how these may impact our function. This is where the ‘Return on Relationships’ mindset comes into its own. In many cases suppliers and internal business partners hold the insight to understanding new opportunities and threats and only by working collaboratively together can we properly identify and act on these events.

In short, savings are only relevant when put in the perspective of greater outcomes. Savings only constitute one part of the value equation. Looking at relationships more broadly and focussing on achieving a “Return on Relationship’ is what should govern procurement logic.

Are you ready to move beyond bickering over cost savings?
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