Strategic procurement: Transform business through data

Can strategic procurement be a catalyst of change in business? Two enterprise practitioners imagine it may, and so they have seen how enabling and embracing data-driven procurement with a strategic mindset has generated results.

This approach represents a change for procurement from a siloed, short-term, fragmented process to at least one that’s longer-term and meaningfully integrated in key operations of the business itself.

“The true change here is how the procurement function is a worth creation function and probably not a value reduction function,” said Barath Narayanan (pictured, left), global head of the BFSI Unit and head of the Europe region at Persistent Systems Ltd. “It’s really more concerning the procurement function having a deeper understanding of the broader business goals. It’s when the procurement function is on the table at the manager level, clearly understands the macro business [and] priorities at each line of business, and so they are thoroughly positioned to influence the needs of the business organization with suppliers.”

Narayanan spoke with Shelly Kramer, managing director and principal analyst at theCUBE Research, in a CUBE Conversation on how strategic procurement transforms business. He was joined by Pratik Patel (right), director of category management, labor, at Mastercard International Inc., and so they discussed key tenets of a successful strategic procurement operation. (* Disclosure below.)

Risk management in strategic procurement

A very important element in strategic procurement is managing risk. Businesses enter into contracts with suppliers that may have far-reaching financial impact, requiring procurement organizations to administer and influence relationships without jeopardizing an organization’s health.

“From a risk perspective, we’re the primary and last line of defense,” Patel said. “It’s vital that we understand the intent of every part we now have in those … agreements, or whatever different contracts there may very well be. We must be that influencer in a way with the supplier to make sure that they understand what risk they should manage. Procurement must take a more proactive role in with the ability to really help manage that risk.”

Relationships with suppliers extend beyond the means of managing risk. A real partnership is vital in constructing a successful procurement operation, in response to Narayanan.

“As much because the procurement function has consideration of the inner stakeholders as their very own clients, equally there may be an importance of constructing a relationship with the external suppliers,” he said. “They’re not vendors, but truly partners.”

Brand identity is a vital a part of strategic procurement, in response to Patel. The worth that procurement brings to a corporation could be a key consider recognizing the group’s critical role.

“It really does start with an understanding of the worth that procurement brings and that’s with establishing the brand,” Patel said. “When you consider procurement, we would like people to take into consideration a worth enabler. It’s vital to make sure that there may be a brand established for what procurement stands for, and all of it centers on higher, faster, cheaper. Because if you do things faster for people, when you’ve a greater quality output for people, and in case you occur to cut back costs for them too, it’s hard for people to not rally around that.”

Leveraging data to generate value

To construct a successful brand for procurement, practitioners are increasingly leveraging data to generate insights and construct relationships.

“Procurement actually has an infinite amount of knowledge,” Narayanan said. “How you exchange the info on your decision-making on spend analytics, the way you construct insights on the info that’s already existing … brings recent ways of working along with your partners, along with your internal stakeholders.”

Narayan also noted that growing adoption of generative AI offered a chance to increase value to business users within the procurement arena.

“Have people engage with the info that you’ve,” he said. “The business users can actually chat and have interaction with that to get insights on the fly, on the indisputable fact that you don’t need multiple people interventions. You provide transparency to your online business users in your data.”

Mastercard took a forward-thinking view of strategic procurement through a project that involved systems inside the legal department. It provided an example of how procurement principles may very well be applied to eliminate pain points in other organizations.

“We established the long run state where we could utilize our ‘procure-to-pay’ system, where the legal department can get the worth that they need as well and we addressed their pain points,” Patel stated. “Today, we’re greater than five years in, and we’re utilizing this and it’s working beautifully. They saw the worth of it and now they keep things up so far too, they spend money on that.”

Here’s the entire CUBE Conversation with Barath Narayanan and Pratik Patel:

(* Disclosure: Persistent Systems Inc. sponsored this segment of theCUBE. Neither Persistent Systems nor other sponsors have editorial control over content on theCUBE or SiliconANGLE.)

Photo: SiliconANGLE