Internal Business Partnering in Procurement
Dustin Mattison interviewed Bill Young. Bill discussed Internal Business Partnering in Procurement.
Internal Business Partnering
Bill believes Internal Business Partnering is important because category management has been mainly about cost reduction and a lot of companies have been through at least one, two, sometimes three phases of category management. The result is that they have plowed the fields and saved a lot of cash. Now purchasing is starting to look at how it can create value, as well as just reducing costs. In order to do that, they need to be much, much closer to their internal clients, but some of those internal clients are suspicious of purchasing because they have some experiences of having their budgets raided. Bill says that purchasing has perhaps a little bit of ground to catch up on before it’s fully trusted as a business partner.
Internal Business Partnering is really a form of consultancy. It’s being the expert on how supply markets work; what you can get out of supply markets; how you can manage them better; how you can improve their efficiency and effectiveness; how you can extend the resources of the organization beyond its direct employees and into the companies that provide it with important services; extending the scope of the resources of a company.
According to Bill what we’re seeing is that IT departments in many companies have already taken purchasing back into their function. You can see companies where they have IT strategic sourcing managers in effect doing exactly what purchasing wanted to do and used to do, and they’ve hollowed out that bit of procurement. The same could be happening in HR, where, if you look at the average HR department, approximately fifty percent of everything they provide to the business is actually coming from external suppliers. They need to have some sort of core competence within the HR function and managing those suppliers, and they’re asking, “Why would we get procurement to do this if it’s so important?” The future of procurement depends on stepping up to the plate and learning how to do this business partnering; otherwise, some of these departments are gonna take it in-house, as IT already has done.
His recommendations are that companies should obviously think hard about Internal Business Partnering in Procurement. It tends to be the service companies that are pioneering this area, and they include the advertising companies, the media companies, a lot of the Internet companies. In fact, Bill saw recently a job description for what looked to any other company like a category procurement manager at Amazon. The words procurement, purchasing, and buying didn’t appear in the job description. He thinks the next stage is going be the high-service companies but still with manufacturing elements, especially pharmaceuticals. They should be looking hard at this area and looking at the transition. The interesting thing will be for a lot of companies who never really fully embraced category management, can they go straight from classical procurement to value procurement? Some have but it’s a big step. So, looking at this area, looking at the skill levels and facing the challenge, that’s the next phase.
About Bill Young
Development of Sales and Procurement Capability