How would your colleagues rate their “customer experience” with the procurement department? If it were a hotel, perhaps it wouldn’t even get a rating above three stars and have countless negative reviews online. Ok, maybe not, but here’s why: The procurement function is often labeled as having old-school, non-integrated technology, complex policies, tangled procedures, and short-sighted insights on purchasing.
It is sometimes a key factor contributing to frustration within an organization. However, customer expectations have changed in recent years, which is now making its way from consumer life into the business world.
Mark our words, procurement’s future will become increasingly customer-focused, in all aspects of the function, including systems, processes, and people. Procurement will be a valued partner within the business, not just a perceived cost reducer. Other stakeholders will begin to recognize the value added from procurement and align better with them.
How do we define the customer within procurement?
First of all, we have to define our customers. Procurement has internal and external customers. Usually, procurement can only access the end customer through the intervention of internal customers. Internal clients matter to procurement because they are key to customer behavior. Therefore, it is imperative to keep that lifeline to internal clients healthy with a routine in place on how to understand customer needs and wants:
- Ask, never make assumptions
- Try to understand not only “what? “But also “why? “
- Work on extending your knowledge from supply market and suppliers to the understanding of the company’s environment, market, competition, consumer trends, and habits
- Study the personal drives of each of your internal customer
- View yourself as an internal account manager, and treat your internal customers as you would your key accounts
- Be involved, and involve yourself, even if others don’t include you “by default “
What are the next steps, and how do I get there?
- Define a clear vision of what procurement organization should be
- Ensure everyone in the procurement organization understands how their role is related to serving external customers, internal customers, and everything in-between
- Map and segment internal customers in similar way suppliers are segmented by using a strategic stakeholder mapping tool
- Understand their sometimes conflicting requirements and interests
- Adjust the procurement organization to be responsive, agile, and business partner ready
- Identify and engage suppliers that are capable of bringing required values by using a strategic supplier management tool
How do I define and measure progress?
- Set up a balanced procurement scorecard that combines traditional procurement KPIs (cost savings, cost avoidance) with business performance-related ones (revenue and profit measures, brand differentiation measures)
- Conduct half-year / annual internal customer satisfaction surveys
- Have regular exchanges and interviews with internal customers
- Use any other opportunity to gather internal customers’ feedback
- Measure key suppliers’ satisfaction (are you a customer of choice?)
What are the key takeaways?
In our experience, a customer-centric procurement strategy starts with internal customers and suppliers. Internal customers are key because procurement can get closer to the customer themselves by fostering tighter integration with customer-facing functions. And supplier relationship management is about customer satisfaction and leveraging spending potential.
In addition, sometimes it is required to reorganize the supply chain to meet customer expectations, e.g., nearshoring to reduce lead time. To open the gates to customer-centricity, a combination of change management, initiatives, capability, and recruiting needs to be implemented. And finally, additional costs for the organization are possible.
Still, the return on investment is tremendous – increased overall customer satisfaction, better alignment with business goals, improved perception of procurement, differentiation from the competition, and increased savings and profit.