Purchasing Leaders: Are You Doing Enough?

Purchasing leadership

Our profession has some of the brightest and most capable people of any profession. But we need to do better, and leadership is not excluded.

I want to do a lot of blogs on this topic over time, so let’s pick one topic at a time when we do this. Let’s talk about purchasing systems. These are the railroad track.

Purchasing is being pushed every day to get more savings, get more results, negotiate more contracts, etc. These are all important. They are part of the train.

Without the railroad tracks, a fantastic train is pretty useless. It won’t get you to a lot of places.

And if the railroad tracks weren’t built to your needs, it’ll go to a lot of places, but none of them are where you really want or need to go. It’s still useless.

For instance, can you go, *at the push of a button*, and find out how much a particular supplier has received in funds over a defined period of time?

Before you say “yes”, I want you to get a mirror and look in it. Is it really that easy? Or are there 40+ entries for the same supplier that you need to manually go through and add up…

Let’s take another example. Can you, *at the push of a button*, find out how much is being spent on chairs in your company? Carpet? Cafeteria services? Landscaping? Building maintenance? Janitorial supplies? Light bulbs?

Again, before you answer “yes”, I want you to go try it. Then tell me how long it took, how easy it was, and how much integrity the answer has.

When you did that query, could you slice by where the internal funds were coming from (which groups), which suppliers were getting the money, how much were they getting, what contracts are in place, what those contracts are and what they say, who put those contracts in place, when they expire, what they do and don’t include, etc?

The answer is a resounding “no”, I’m sure of it.

Why is it so hard to do an ROI analysis to get quality purchasing systems in place? Companies spend millions on systems, but they are always purchased and modified with some other internal group’s interests in mind (accounting, finance, sales, human resources, etc).

Tell me I’m wrong, I’d love to hear it. And if you think I’m dreaming up pie in the sky scenarios, go look at how elaborate the sales and CRM systems are at the companies you are negotiating with.

I personally benchmarked a higher education institution in California with multiple campuses across the state, and they had just about one of the best purchasing systems I’ve ever seen.

Guess what? They had the guts to tell the individual universities to stop acting like independent purchasing entities and start acting like one. Remember, this is the government we are talking about.

Even more, the leadership of that University system had the foresight and the influence skills and the leadership to invest in these systems during their worst fiscal crisis ever.

In fact, their statewide leader said (I’m paraphrasing) “It’s BECAUSE we are in a fiscal crisis that we need to invest in purchasing tools. Purchasing will get us out of this problem.”
THAT’S what I call purchasing leadership. And they are now on track to saving an extra $200M/year as a consequence of this leadership decision.

Any other organization would have said (again, I’m paraphrasing) “It’s BECAUSE of this fiscal crisis that we can’t afford new purchasing systems. Now is not the time. We will reassess in the future when discretionary funds are more readily available.” Tell me if I’m wrong, but I know you are nodding your head right now in agreement.

Do you know how much more headcount was needed for this new model that was implemented in my example above? NONE. That’s right, when purchasing professionals in the same company aren’t independently negotiating redundant contracts, you free up all sorts of time.

You see, budgetary funds for systems implementations are never decentralized. No purchasing leader, no matter their level, has the funds to make this kind of decision.

You have to be able to convince the people with the BIG bucket funds, which usually means the CEO and the CFO, and then the IT dept, who can put it all to a halt, that purchasing systems will give the company a strategic competitive advantage in their industry.

So hold yourself accountable, but don’t let leadership off the hook. Purchasing leaders, your job is to get purchasing OUT OF THE BACK OFFICE and have them BE AND BE RECOGNIZED AS A VALUE ADDED CENTER OF PROFIT.

Now go make it happen.

Be your best!

Omid G

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