The Value of Procurement

Why it’s crucial for success

The Misunderstood Role of Procurement

When working in the procurement sector, a common misconception is that the procurement specialism notoriously overcomplicates projects and stunts progress. Understandably, for those who have worked with a procurement team, this characterisation might resonate with your experiences. However, this perception overlooks the strategic value that the procurement function can bring to an organisation, streamlining processes by focusing on cost efficiency, risk management, and regulatory compliance.

This blog explores these aspects, illustrating how the cultural perception of procurement can be transformed from a perceived blocker into a vital strategic partner, highlighting the true value of procurement as an essential enabling asset for the success and sustainability of grant recipients and local authorities.

Cultural Perception of Procurement

Within organisations, the procurement specialism is often viewed as a cultural blocker due to its reputation for imposing stringent processes and bureaucratic hurdles. This perception stems from misconceptions that procurement’s primary role is to enforce compliance and control costs, rather than to foster innovation and streamline operations. The notion of procurement as a hindrance within businesses is often adjacent to views held by industry when interacting with large procuring bodies. The process-laden pathway to securing a contract with a prospective major customer is viewed as a minefield of daunting and obstructive hurdles, preventing market newcomers from engaging in fruitful collaboration.

While procurement specialists aren’t always recognised as enablers for facilitating hassle-free processes, bringing buying organisations closer to supply chains and harnessing innovation, they play an essential part in protecting organisations by ensuring adherence to legal and commercial procedures.

Six ways procurement delivers business value

There are six ways in which procurement can deliver business value to organisations:

Maximising value in outsourced work: procurement professionals play a crucial role in ensuring organisations derive maximum value from outsourced work. By implementing value-for-money savings, procurement prevents wasteful spending through poorly drafted contracts and ensures that organisations pay the right price for services and resources. Additionally, procurement teams assist in developing precise specifications and requirements, ensuring that contracts deliver exactly what is needed from the market.
Legal and commercial protection: one of the key functions of procurement is to safeguard companies through well-structured contracts. This involves ensuring the correct level of risk allocation, liability, and appropriately selected terms and conditions that protect the procuring body while remaining fair and equitable to suppliers. This balance is essential for maintaining healthy and sustainable supplier relationships, as well as cultivating a buoyant market.
Strategic spend management: developing commercial strategies that align with organisational budgets and key goals is a fundamental aspect of procurement. This includes advising on market engagement strategies, recommending how to interact with industry, communicating with suppliers and navigating niche markets, as well as cost benchmarking and contract development. By doing so, procurement teams ensure that spending is efficient and aligned with the broader strategic objectives of the organisation.
Regulatory compliance: for public sector procurements, adhering to correct commercial procedures is vital for compliance with UK public sector procurement regulations. Procurement specialists ensure that all processes, such as competitive tendering procedures, are followed meticulously, maintaining both legal and operational standards. This compliance not only protects the organisation but also enhances its reputation and operational integrity.
Aligning business objectives: procurement also plays a pivotal role in aligning business objectives by harmonising categories of spend and contracts. Optimising payment terms benefits the cash flow of the business and overall performance of the organisation. By aligning procurement activities with business goals and future organisational strategy, procurement teams can enhance the strategic value of an organisation. This alignment engenders stronger supplier relationships, leading to better collaboration and innovation. Additionally, it supports sustainable practices by ensuring resources are used efficiently, ultimately contributing to the long-term success and resilience of the organisation.
Promoting sustainability and social value: procurement can advance sustainability by choosing suppliers with eco-friendly practices, thereby reducing environmental impact. It also enhances social value by engaging local suppliers, supporting SMEs, and ensuring ethical behaviour. These efforts not only improve an organisation’s reputation but also contribute to public initiatives like environmental stewardship. Through strategic procurement, organisations can lead in promoting sustainability and encouraging industry-wide adoption of sustainable practices.

The Future of Procurement

As grant recipients continue to evolve and are forced to adapt to an ever-changing global landscape, the role of procurement is set to become even more critical. In the grand tapestry of modern business, procurement has emerged as a vital cog in the works, quietly weaving the threads of supply and demand into a cohesive and efficient operation. It is not just about buying goods and services anymore – it is about strategic sourcing, risk management, and fostering sustainable practices. This represents an important evolution, one that underscores procurement’s central role in shaping the future of business. While technology like AI can significantly enhance procurement processes by automating routine tasks and providing data-driven insights, the need for a holistic understanding of people, processes, products, and projects ensures that the procurement function will never be fully replaced by AI.

When reflecting on the procurement specialism in the future, instead of seeing them as gatekeepers of endless paperwork and tedious processes, consider viewing them as the architects of your organisation’s success. By fully embracing the potential of procurement, businesses can reap all the ascribed benefits outlined in this article. They are not just ticking boxes – they are paving the way for a more efficient, innovative, and sustainable future.

Max Pugh is a Senior Procurement Consultant at Arup, specialising in providing procurement and commercial advice. He has significant experience in delivering high-value public sector contracts, ensuring effective and efficient procurement processes tailored to the needs of public sector projects.

If you have any questions on this topic, or would like support, please contact your Delivery Associate, or email DeliveryAssociatesNetwork@Arup.com