Procurement Has a Big Problem – It’s Boring
It’s true, it sits close to the very end of the lack-of-glamour spectrum within the dusty and poorly lit back office of most organisations. The business end of the organisation on the other hand – sales and marketing or product development perhaps – that’s where the glamour is – they really know what business is about and they know how to spend the organisation’s money. They certainly don’t need procurement to tell them.
Perception is reality and anything that can help improve the perception of procurement will really help procurement embed their worth within a business. And that’s why I think rebates are great. What do you mean “where’s the connection?”
Mark Perera wrote a piece recently in the Procurement Intelligence Unit blog asking “How do you measure procurement’s value? Income?” He goes on, by using Oxygen Finance’s model as an illustration, to explain some of the benefits of using rebates as an alternative to discounts from suppliers. I think that the benefits go further.
The poor perception of procurement is a real problem. If the business has no respect for procurement, they’ll continue to use their own suppliers and it doesn’t matter what great discount procurement have negotiated, if they’re not used, no value gets delivered and the perception really does become a reality – procurement delivers no value. If on the other hand procurement is delivering revenue and the business targeted on its procurement related revenue contribution – that sends a much stronger message than waving the P2P stick and shouting about compliance. The “I-can-get-a-better-price-myself” objection disappears because the business knows that the price paid is retail and the whole image of procurement is transformed.
Rebates won’t work every time but they can be a very effective way of evangelising the benefits of procurement and changing the purception of the procurement function from boring to, well, less boring. Let’s not get too carried away!