Procurement reporting line

Procurement reporting line

Transcript

Hi everyone,

Allow me start off this sales tip with a simple question:

How can you sell to procurement professionals if you don’t know what their objectives are?

From personal experience, I have met with a lot of sales professionals trying to sell their product or service to me without actually understanding my needs.

So, how can you tell what a buyer’s needs are when you are going to meet them for the first time? Here’s a little trick…

The functional objectives of procurement are determined by their reporting line!

In 95% of cases, procurement professionals will report into either the CFO, COO or CEO. The reporting line is likely to determine their approach to negotiations.

CFO led teams will generally focus on the following 2 or 3 priorities:

  1. Costs through better buying. This what you typically expect from buyers.
  2. Increasing cash flow. The 2 best ways to generate cash by procurement teams is to reduce stock levels and to extend payments terms.
  3. Managing predictability of spend. They sure don’t like overspending vs budget; however, underspending is not preferred neither since that means they have financial assets frozen that could have been used for other activities such as marketing.

COO’s will have objectives around costs and service. However, it’s crucial to note that in these cases service will always be more important than costs. The simple reasoning behind this is that if operations grind to a halt, prices don’t matter anymore. COO’s will do anything to keep the business running.

Around 25% of procurement teams report directly into the CEO. They usually have a broader set of objectives around costs, cash, service, quality, innovation etc. In principle, the procurement objectives are much more aligned with the total business objectives.

Especially in the area of innovations is where you can make a difference. How can you help your customer achieve greater results by using your knowledge and insights?

To facilitate this, rather than asking what their procurement objectives are, try asking what their business objectives are? Help them achieve these and you’ve just built a strong relationship.

So, when you get to the negotiating table, know that costs and cash are always important. But procurement’s reporting line may well determine other objectives that are more important.

It pays to understand where procurement sits within an organisation, this enables you to prepare accordingly for the inevitable negotiations.

Happy negotiations everyone!