Much attention has been given to procurement's expanding role at major corporations. Although this has exacerbated a difficult period for the marketing communications industry, PR firms have much to gain from understanding and winning over a "new" player in the relationship mix. With that in mind, an historical perspective of the procurement function is in order.
In the 1970s, multinational corporations were vertically integrated and self-sufficient. Relationships with outside providers were not coordinated and almost solely dictated by price. Purchasing staff maintained adversarial, paper-intensive vendor relationships that were distant from the actual end-user.
Through the 1980s and early 1990s, as companies increased outsourcing, the role of purchasing evolved strategically. Electronic data, improved processes, and teamwork brought corporations' disciplines into better alignment. Quality and delivery surged in importance. Pricing leverage resulted from consolidating more of a company's spend with fewer sources. As these suppliers became more critical to the end customer, specific performance measurement tools prevailed.
In the past decade, with greater focus on core competencies, spend for outside materials and services has surpassed employee expense as corporations' largest single cost component. Procurement departments have firmly established themselves as strategic entities, working on multifunctional global teams to maximize the value of all categories of expenditures. Overall process simplification, continuous measurable improvement, and long-term supplier alliances have become today's key initiatives, alongside reportable cost savings. The procurement function now serves as the integrator for the supply chain, bringing diverse internal customers closer to select outside providers.
Against this backdrop, the recent economic downturn has forcibly increased the scrutiny of all company expenditures. Simultaneously, procurement departments have been downsized. Thus, "uneducated" procurement personnel have been assigned responsibilities to buy PR services. How do firms maintain and enhance their position? Here's my top 10:Treat procurement officers like real people rather than the enemy. Be inclusive. Understand procurement's key concerns. Be open to measurement. Meet in person. Don't negotiate purely over the phone or electronically. Represent your company's interests with conviction. Ensure that your pricing is 100% defensible. Eliminate all mystery and inefficiencies in business practices. Educate procurement officers about PR and industry norms. Elevate inappropriate practices to client stakeholders or senior management. Drop clients that don't mix with your culture or overextend your range of fairness. Focus on long-term gains and always play to win-win.
And one more bit of advice: If possible, talk about compensation toward the end of your dialogue with procurement. Don't allow it to interfere with communicating your real value.
So, other than securing a reasonable cost within budget, what other factors should be of concern to procurement people?Contractual terms that protect the company; Category-specific expertise and knowledge of a client's company; Customer satisfaction, quality execution, timeliness, responsiveness; Administrative excellence - billing, reporting, and the like; Supplier financial viability and continuity of account staff; Strategic partnership that adds value; Continuous improvement
These factors apply to both material commodities and professional services. I do believe, however, in a fundamental distinction between buying "stuff" and purchasing people's time. General procurement supports manufacturing by identifying the lowest cost providers. The order of priorities is cost, on-time supply, and then quality. Specialized procurement, such as PR, generates revenue and seeks best-value providers. Quality is clearly the top priority, followed by on-time delivery, and lastly cost. Much too often, a general procurement mindset is misapplied to the purchase of all professional services, to the detriment of all concerned.
The essence of procurement's role needs to be one of stewardship and of building outstanding, lasting relationships. As the process owners, their responsibility is to develop, implement, and verify that tools achieve sustainable productivity improvements for both suppliers and client stakeholders. If this role is not properly fulfilled by procurement, an objective third party is necessary as the voice of reason, promoting an ongoing dialogue that ensures fairness, integrity, and trust among all parties. The end result is the elimination of the defensiveness that PR firms so often feel when scrutinized by client procurement.Francisco Escobar, president of JFE International Consultants has had 20 years of finance, marketing, and procurement experience at a Fortune 200 company.