by Sebastian Keith Chua, Head of Procurement, Health Promotion Board (Singapore)
Is your procurement’s focus still primarily on compliance to the policies, calling of tenders and quotations, processing of purchase orders and prevention of lapses and fraud? If so, the full value of the procurement discipline is not consistently recognised and therefore, not optimally leveraged in achieving business commitments and success.
In the digital age, is procurement futureready to earn that “seat at the table” to transform business strategy and discover the game-changing innovations? Digitalisation has changed every aspect of our personal lives, including reshaping the way we work. From the way we engage with colleagues and trading partners, to the way buying and selling gets done. It becomes essentially critical for procurement to unlock new ways to manage spend, strengthen supplier relationship and deliver even more value to our organisations. Procurement therefore has to transform to communicate its value beyond compliance, uncover new opportunities to stay relevant and become a strategic business partner for the organisation to succeed.
Transforming procurement from a tactical to strategic function
Due to the set-up of procurement in some organisations as a compliance and transactional function, the stakeholders perceive the role as a gatekeeper and an operational bottleneck with long processing lead-time. The perception is a reactive one where procurement only responded upon user’s request, resulting in an ad-hoc relationship. There is also a lack of true partnership between procurement and its stakeholders in understanding each other’s deeper concerns, leading to misalignment of commitment and business needs. Moreover, the challenge of overcoming the failure of stakeholders at all levels to internalise the procurement principles, which resulted in major audit lapses. Often, the business focus was mainly on delivering the Key Performance Indicators without considering the merits of Value-for-Money (VFM) through Demand Aggregation (DA), Market Sourcing, Supplier Enabled Innovation or Mobile & Digital Technology. The silos in operations and lack of collaboration resulted in duplicated efforts in procurement without economies of scale, leading to operational inefficiency, higher purchasing cost and slower time-to-market. The pressing question we need to ask ourselves is: do we want to take action? Some believe that the solution is already present, but it is just not seen. Indeed, the right procurement person has the keys to unlocking these values, not the tools and processes, just a change in our procurement attitudes.
Communicating procurement values beyond compliance
Procurement has a choice when it comes to stakeholder relationship – reactive or proactive. In order to transform, we need to focus on these ethos to move procurement beyond compliance – (a) Be closer to stakeholders and suppliers by collaborating and building up market capabilities, (b) Buy cheaper by delivering VFM, (c) Enable faster time-to-market by shortening procurement lead-time, (d) Make simpler by driving process automation and programme excellence.
No one would deny that procurement needs to follow the right process, but should this be what defines us? The best-in-class procurement function creates a new brand with a clear vision, mission statement and insight to align its commitment with the organisation’s goals, and adopts a holistic approach to deliver value procurement. The new brand sets the tone for procurement to be a trusted partner for the stakeholders. It guides the team to focus on value creation beyond their transactional and compliance roles.
The theory of success says that the quality of conversation determines the quality of action/decision. The procurement partnership with the stakeholders therefore starts with a quality conversation. The first rule of any procurement is to listen to the customers (i.e. stakeholders). A large part of procurement work involves persuading, challenging and influencing the stakeholders for the better of the decisions. The success is often defined by how well procurement shapes and manages the web of relationship.
When we embarked on the transformation, we ask our stakeholders, “What are your best interaction with procurement?” Their replies were “No interaction”. What has gone wrong? To be honest, quite a lot. It has got to do with not properly managing the business perception of procurement. The business sees procurement just as a governance function with no other added value services. In order to transform procurement, it is essential to make it easier for people to come to procurement, make it fun and interactive. We could have a mandatory policy to set procurement in place, but once that is achieved make people ‘want’ to come to you instead of ’having to’.
The most common issue for procurement is the ongoing challenge of not only extracting value, but of communicating this value to our key stakeholders. Value is ultimately in the eye of the beholder. We should drive procurement innovation by putting the end-customer and stakeholder’s values first. If we save money and diminish our stakeholder’s ability to succeed, then we are being counter-productive. We must show the business that procurement cares and is willing to get involved. There is no magic trick in winning over business confidence. It requires core behavioural competencies to solve business problems and build credibility by delivering wins. These wins may be small initially, but will grow as we become more engaged in the business. When we start to win, people believe in us. This is where collaboration begins, which is key to transformation. A lot of times people have failed or are discouraged to innovate when they look out for big steps that will make all the differences or try to attempt the impossible task of doing everything at once. We should not underestimate the magic of winning small, as it can lead to winning big or larger changes when we work on small steps in the right direction.
Procurement needs to be revolutionary and leads change, rather than adapting to change. A lot has been said of artificial intelligence and data analytics, artificial intelligence and data analytics, which alone cannot transform any business. We need both human skills and digital technology to transform our jobs. Procurement should learn to challenge assumptions and benchmark competition to look at what other companies are doing and what can be done differently. We must have the curiosity to understand the business needs and market capabilities, and the intellect to link both with solutions. The adoption of a flexible approach to stakeholders is also key to stakeholder management. We should always begin the stakeholder engagement journey with an end objective of a true partnership. Eventually, we should aim towards offering a delighting user experience to “wow” our stakeholders and embedding a service culture into our Procurement “Way of Working”.
In the new age of technology, procurement has to continuously evolve and play a bigger role in the digital strategy in order to make its service to the stakeholders awesome again. A shift to digital sourcing is beneficial for customers and businesses alike, not only in delighting customers with an interactive, user-friendly digital experience, but also by extending digital transformation efforts to attain operational excellence, realise cost efficiencies and achieve business agility.
About the Author
Sebastian Chua is currently the Head of Procurement at Health Promotion Board (HPB) reporting to the CEO. Prior to joining HPB, he was the Head of Procurement with Microsoft and Alcatel Lucent. He has been nominated for numerous awards at the World Procurement Congress (UK), ProcureCon EPIC Awards (USA), CPO Award by The Faculty (Australia), and Procurement Leaders APAC Forum, among others, in recognition of his procurement leadership. Sebastian is also an industry speaker at the NUS Business School, The Logistics Institute – Asia Pacific and Nanyang Business School.