As a consigliere, I am accustomed to providing counsel and advice to others. But when I need to look for answers or insights into situations, I turn to the great leaders, philosophers, inventors, and industrialists of the past.
Recently I was thinking about the disparate amount of thought, energy, resources, and money companies spend on sales vs. procurement. Whenever earnings and savings come to mind, I am reminded of our great forefather Benjamin Franklin who said, “A penny saved is a penny earned.” Since saving money is a primary goal of procurement teams, perhaps we can say Franklin is the Godfather of procurement, or at least the first to articulate its value.
Let’s take a look at the value of a penny saved. Every penny saved allows a company to invest more in R&D, infrastructure, personnel compensation, sales and advertising, and increase owner equity. It allows a company to be more competitive in the marketplace by offering the same goods and services at a lower price or providing better goods and services at the price of its competitor’s lesser goods and services. Isn’t this the cornerstone of capitalism, incentivizing companies to provide the best goods and services value at the lowest price to consumers? So, if a penny saved or earned is valued equally, why do sales and marketing get all the love when relatively compared to procurement?
I personally think this is a perception problem. Procurement isn’t sexy like sales. I think companies are too focused on the lure of hunting and taking down new accounts, and secondarily on growing their current accounts. Think about how your company values the sales hunters vs. the sales farmers, or those responsible for new business development vs. renewals and upsells. Have you ever known of a President’s club all-expense paid vacation package with corporate leaders for the team’s top procurement producers? Maybe it is a more primitive way of thinking, but the freshly hunted kill is always viewed as sexier than the farmed fruit and vegetables. And both are far sexier compared to buying the tools for hunting and farming, yet neither can be accomplished very effectively without the tools.
Maybe it is simply a perception of gaining new revenue vs. avoiding costs. Not to make this political, but have you taken a look at any level of government lately and all the efforts placed on finding new sources of revenue vs. the general disdain or indifference for cutting costs by spending more wisely.
Or think about New Orleans and the hurricane Katrina disaster. For years there were warnings that the levees may not stand up to a severe hurricane and that reinforcing the levees was necessary to avoid a potential disaster. But the levees already existed and paying for something that you cannot see to avert a potential disaster that may never occur is not sexy and is tough to generate excitement for funding. Spending billions on new stadiums with luxury boxes though is sexy and exciting as they are new, tangible things people can see and experience. They are sexy projects and hence get approved. Of course if you could reverse time with all of the devastation and destruction after hurricane Katrina fresh in people’s minds, the funding for reinforcing the levees would seem like a no brainer at pennies on the dollar compared to the human and financial costs of the aftermath.
So, you might be sitting there scratching your head and wondering what’s the point of all this. The point is that only a small percentage of wise people recognize value in all its forms (think Benjamin Franklin’s penny saved equals a penny earned). But some value is sexier than other types of value, and therefore gets shown a greater degree of appreciation, love, and attention than other forms of value by the general masses (think new stadiums compared to levee reinforcement).
Even though every penny saved through procurement contributes as meaningfully to the business as every penny earned through sales and marketing, procurement gets less attention and resource investment from a businesses’ leaders and that is short sighted. Procurement needs a public relations campaign to raise awareness of its importance and the value it brings to businesses.
If you don’t value and appreciate something, then how can you possibly be expected to offer advice and assistance to contribute to its value? The folks at UpperEdge value the sourcing and procurement process and support all functions and levels that contribute to this process. If you’re interested in learning more about how UpperEdge can complement your current sourcing and procurement teams and processes, give them a call at 617-412-4335.