Procurement’s role in TPRM is shifting, and executives play a key role in embracing this change and shifting company culture. While the traditional approach to procurement centered on margin impact and managing suppliers from an operational perspective, forward-thinking departments are focusing on the long-term strategy and impacts that the role is playing in today’s world.
High-risk third-party engagements necessitate procurement’s shift to a more holistic strategy. However, without the buy-in and support of executives, these initiatives can lose momentum and support.
To help meet these evolving challenges, procurement must be aware of risks introduced by key suppliers and be provided with the appropriate tools and technology to proactively manage them before major losses or breaches occur.
Disruptive areas that are leading this necessary shift in procurement’s functions include:
Isolated, siloed procurement functions: Traditional procurement departments were de-centralized from the larger organization and focused on transactional, short-term initiatives. Organizations that still exemplify these silos face challenges when it comes to managing risks from all angles. Driving collaboration and strategic initiatives between departments from the top down is a best practice, while still managing a daily workload of financial responsibilities.
Elevated third-party risks: Third-party risks are rising, and can take the forms of cyber-attacks, supply chain delays, components shortages, sustainability challenges, and more. While the frequency of these events rises, organizations are increasingly being held accountable, and procurement plays a critical role in managing vendor relationships.
Unorganized, decentralized data points: Procurement professionals deal with a huge amount of data related to personnel, financial, operational, regulatory, contractual, and other factors. When this type of information is stored on different platforms, is inconsistent, incomplete, or managed by different teams, procurement cannot gain proper insight into potential external risks facing the organization.
Without the buy-in and support from executives and key stakeholders, procurement teams will not be able to make holistic risk management improvements. While not everything will be implemented immediately, there are general aspects of agility that should be on procurement and executives’ agendas, including:
Empowering a shift in procurement culture: One of the most important areas to focus on is to embrace the power that procurement holds within an organization. During years since the pandemic, CPOs and their teams protected their organizations, and executives should continue to take notice of these critical functions. Procurement should be empowered to include themselves in company strategy and products that matter, build teams to better combat emerging risks, and find ways to drive positive change.
Thinking about risks holistically: To take TPRM beyond a single function and into holistic areas for acceleration, CPOs should be empowered to focus on their collaboration and influence across job functions, not just as a spend relationship. Being involved in the entire third-party/supplier relationship management process ensures agility. This allows prioritization of suppliers who may pose a higher risk to an organization, rather than relying on a one-size-fits-all procurement strategy that may allow risks to slip through the cracks.
Company strategy: By shifting a primary focus to long-term initiatives and goals, procurement professionals can gain a greater foothold in wider organizational strategy. This includes determining risk management priorities and working with risk, legal, executive, and other teams to better manage supplier onboarding, relationships, and risks. By being in tune with company strategy and thinking of procurement activities from a risk-based approach, procurement teams step out of the shadows and into more collaborative roles.
Bring technology capabilities into the future: By prioritizing data cleanup and investment in TPRM tools that can build centralization and efficiency, CPOs can work with executives to see positive impacts and scalability across the organization that supports overall risk management.
If there are challenges with incorporating digital procurement technology into an organization, gaining executive sponsorship is an important way to invest in the tools that will assist in procurement and supplier data. Emphasizing both short and long-term goals and wins, and how these technologies will drive organizational resiliency and agility can be critical when approaching executives.
Maintaining healthy supplier relationships is not just about onboarding, it also must include managing risk, quality, and performance of suppliers, assuring compliance where needed, while still owning the transactional responsibilities that are at the foundation of this role.
In order to manage these responsibilities, drive efficiency, and take a risk-based approach to procurement, executives within a company need to recognize procurement’s strategic value to the organization. They must step up to establish an organization-wide culture that empowers procurement to be a driver in managing the full lifecycle of their organization’s supplier and third-party relationships.
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