Procurement often gets stuck in the 'cost-cutting corner', but the truth is, it can be a strategic powerhouse when we embrace a commercial mindset. Through this lens, procurement can be a dynamic lever to achieve your organisation's broader objectives.
To start, you need to consider addressable spend. This should be under the remit of the procurement function to ensure a strong commercial focus. To bolster financial viability, addressable spend should only account for 30 – 70% of your organisation's spending, depending on your business context.
Leverage Data Insights
To embed commerciality in your procurement function, you need to understand your business's key performance measures to determine how you'll achieve them. This means knowing your numbers.
Unsurprisingly, 98% of decision-makers are investing in insight tools, automation and AI for procurement. We know data offers a competitive advantage, but only if you ask the right questions.
Where is the data you need to get the right insights?
Internal Data: Conduct a comprehensive analysis of contracts, products, preferences, behaviours and performance to get a clear picture of your current state.
External Data: Use industry reports, market intelligence, and supplier performance data as benchmarking tools.
How do you bring it together to ensure it offers meaningful insights?
Standardised Data Collection: Implement systems to capture consistent data across your organisation. ‘Big-picture’ data analytics are powerful in helping you identify actionable insights to improve commercial performance.
Data Collaboration: Encourage open communication between procurement, sales, and other departmental teams. When everyone is on the same page, data insights can be effectively actioned to achieve organisational objectives.
What levers or buying behaviours can you use to meet agreed targets?
Negotiation Strategies: Use data-driven evidence to negotiate and secure long-term partnerships with suppliers. Commercial growth can be enhanced by ensuring you have competitive goods and services across the duration of your contracts.
Supplier Performance Management: Monitor supplier performance against agreed objectives. Manage risk by having measures in place to address shortfalls, including penalties to ensure your supplier relationships are driven by a joint commitment to deliver. We also recommend including termination clauses in your contracts so you have the flexibility to find alternative suppliers if needed.
How can you start to tackle big data and AI?
Invest in data analytics tools: Process complex datasets, improve data visibility and identify trends for effective decision-making.
Explore AI-powered solutions: Look for automation tools that free up your team to focus on strategic commercial initiatives.
Continuous Improvement through Market Insights
A commercial focus also requires market awareness and interoperability. Everything is connected—clients, strategy, systems and the market environment. Understanding how to connect the dots can enhance your commercial success and future-proof your business.
Consider:
How are your competitors responding to market challenges, and what can you learn from them?
Who are your key suppliers, and what challenges are they facing now and in the future?
What trends will likely impact your business in the next 3-5 years, and how will you be ready to capitalise on them?
How can you build long-term partnerships while ensuring your competitiveness and agility to respond to emerging trends or new technologies?
A commercially focused procurement function drives growth by aligning spend with organisational strategic objectives. It leverages data and market insights to drive value creation and maintain financial viability.
If you want to improve your business's profitability and financial performance, our team can fast-track it for you. We can help you get started with strategic advice or manage the entire process through full-scope end-to-end procurement with Procurement as a Service (PaaS).
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