Procurement organizations are constantly being challenged to create more value. The initial step for each company is to define exactly what value means given their unique economic context. The language of value, like value itself, is about discussing topics with an emphasis on creativity and potential.
Since value is qualitative, procurement must be able to discuss, explain, and promote it without being overly reliant on the quantitative measures to which we are accustomed. Having the ability to discuss value creation with executive leadership greatly increases the likelihood that procurement will come away from the conversation well informed enough to execute on their commitments.
At the outset of a project, asking open-ended rather than closed-ended questions gives procurement insight into the opinions of internal stakeholders and suppliers. Blending multiple unique perspectives on a category provides procurement with the opportunity to create a new strategy, identify a new source, or modify internal processes for better cost management. Rather than asking specific questions that will elicit data responses, value is found in questions such as, “What would you do if…?” or “Why is now the right time to…?”
When results are discussed at the end of a project, the language of value communicates the contextual background not captured in annual spend, savings percentages, or supplier rationalization statistics. Value is represented more by the ‘how’ and ‘why’ as it is the ‘what’. Acknowledging that savings is still the primary metric for procurement’s performance, value exists in the approach taken to negotiate savings. Rather than stating a project’s results as, “We negotiated 8% savings” the language of value adds “… by switching to a more standard specification” or “…by changing our inventory management strategy to better match demand”.
The language of value also ensures that the communication of benefits match the audience. Finance will want to hear about payment terms. Operations will want to hear about additional input the company gains into a supplier’s R&D efforts. The CEO will want to hear about tangible plans for minimizing risk. Procurement often accomplishes all of these things and more, only to experience frustration when their efforts are undervalued or misunderstood. Making sure each advantage is communicated effectively to each stakeholder group is the point of fluency in the language of value.
Are you fluent in the language of value? How has this changed your priorities?
Has it improved your working relationships with suppliers and internal stakeholders?
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