Defining and demonstrating ‘value’ is a constant challenge for procurement professionals. Whether you’re making a case for more staff or demonstrating the need for a more efficient digital solution, helping senior stakeholders understand the potential benefits of a procurement investment often feels much more difficult than it should.
This is never more apparent than when making a case for investment in human and digital resources; stakeholders invariably want to know what value a procurement investment will bring, and how quickly it will pay off. And this is not only the case when we are facilitating procurement projects for our key internal business partners, but also when we are articulating the value that we deliver to the organisation. A key indicator that has traditionally been used within procurement is ROI (return on investment), delivered as a saving or benefit tracked throughout the year, which ultimately benefits the working capital position of your organisation.
This article covers how to define and position value for optimal effect, including being mindful of the time variable within value realisation.
Defining and demonstrating value, the perennial challenge
The word ‘value’ is intrinsically linked with procurement. We are all constantly in pursuit of value, and trying to unearth better ways of defining, measuring and tracking value within our work. Very often procurement has to provide clear justification for investment within its own function, whether that be human resources or digital resources. Within the digital space, procurement professionals are challenged because many organisations will not necessarily be prioritising digital funding within procurement, yet the benefits of digital investment can be significant. It often takes either a business problem that needs to be solved, or an innovative opportunity, to create a compelling reason for such funding.
As a result of this, procurement must be able to clearly state the justification for funding, with clarity of business outcomes, and the project objectives and target deliverables to convince senior leadership to prioritise funding.
The opportunity mindset
Demonstrating the correct mindset within procurement to embrace this constant justification and focus on value is hugely important. With an ‘opportunity mindset’ you do not simply perceive this scrutiny as a challenge that brings negative pressure, but rather embrace the chance to demonstrate leadership and view it as a positive opportunity. Digital enablement should be front-of-mind within this approach.
Create a compelling narrative
Creating a compelling narrative is critical in being able to articulate value to your executive team. Let’s explore some key themes which may assist you to articulate value. These are crucial when positioning a multidimensional value proposition for digital procurement investment.
- Improve cadence, progress and reporting on direct customer impacting projects
- Enable internal business partners to originate and progress demand easily
- Ensure efficient change management, adoption and utilisation
- Ensure effective business controls, enabling design and operating effectiveness
- Ensure auditable compliance to regulation, legislation and policy
- Drive improved supply chain risk management
- Compliance to Information Security Standards
- Enable organisational commitment to economic, social and environmental sustainability
- Visualise key metrics across supply chain inclusion and diversity
- Digitise ethical workflow compliance (e.g. modern slavery) and pre-supplier onboarding
- Enable improved cycle times for key work processes
- Accelerate and guarantee user adoption and utilisation
- Digitise Procurement workflow, pipeline and resource management
Innovation and continuous improvement
- Zero integration required
- Access to rapid product development upgrades
- Leverage industry specific workflow configuration and data visualisation
- Enable budget forecasting accuracy through real-time visualisation
- Demonstrate real-time cost/benefit analysis and realisation with enhanced data visualisation
- Leverage digital workflow to prioritise resources and provide immediate clarity against business objectives
Supplier Relationship Management
- Enhance ‘customer of choice’ status with material supply partners
- Minimise compliance and reporting burden with enhanced workflow and visualisation
- Rapidly onboard new suppliers and re-certify existing suppliers
- Rapid implementation timeline
- Customised, turnkey solution with zero integration
- Enable category based procurement strategy and broader business strategy
Don’t Underestimate Speed-to-Value
Being an informed buyer and ensuring your selection of digital procurement solutions is fit-for-purpose can assist you in realising all of these benefits. However, do not underestimate speed-to-value. Why? Because many organisations have contracted their expectations on the time to realise value. It is increasingly the case that procurement must demonstrate value within the first year, especially when part of a broader organisational transformation strategy. Therefore, it is imperative that you understand the configuration, integration, change readiness and pathway to optimal utilisation when selecting a solution. This should occupy an appropriate weighting within your selection criteria as you simply cannot afford to consume months of cross-organisational resources before you even get to go live. Your Internal rate of return, cost benefits ratio or net present value calculations may not tell the full story, so be prepared to deliver on the need for speed.