All departments add a level of value to your company. IT, finance, sales. These functions are all clearly defined in the corporate hierarchy and deliver on their mission day in day out. In a medium sized or growing business this may not be the case for procurement. Procurement is often seen as a function that can be developed later on and it then takes time for it to be seen for the value it delivers.
Why is this?
The truth is that most people assume that they know how to buy things; computers, stationery, print, office space etc. In the most part they are right, we spend our lives spending money and our perception is that we all do a good job.
To be honest this is probably true and when the company is small, or the value of the purchases is low it’s probably ok to pursue this path.
Procurement really comes in to it own when the value or significance of the purchase becomes such that overpaying, or buying the wrong item, will have a significantly detrimental effect on the company.
It’s important to note that suppliers are in business to make money. For most suppliers, if they see an opportunity to make a sale, or increase margin, they will do so. When they come across a client that doesn’t understand market dynamics, there is the potential for them to overcharge or under service the client.
Procurement is the function that can help with this. As with any function, having the time to focus on the problem at hand will help to deliver the right result. Having the right tools and training will further bring the problem to a swift conclusion.
One of the most significant oversights we see in SMEs and growing businesses is underestimating the time it takes to realise that there is a need for procurement and then the time it then takes to get it working.
Sales and training
Sales people all over the world are sent on training courses in how to handle objections, negotiation, understanding their product and helping to shape customer perceptions; conversely most companies who don’t have a procurement function don’t train their people to buy things.
What we see is that in many instances they’re typically thrown into the situation where they are vastly over matched by the supplier who has a practiced approach and is well versed in dealing with client objections.
The imbalance is clear and it gives the salesman an unfair advantage. The role of procurement is to bring this balance back to the negotiating table and ensure that the deal agreed on is the right one.
SMEs and growing organisations are renowned for not paying enough attention to procurement. In instances where the company is producing a physical product they are more likely to invest in procurement services for their direct costs (and rightly so) but for a large number of companies if they looked at their indirect spend it forms a huge percentage of their overall spend and should be managed effectively.
We can see from research that for a large number of companies their cost base is structured as follows; direct costs, salaries, marketing, other indirect costs. With this spend pattern in mind it should be clear that the procurement of marketing should be a focus.
Marketing Procurement: Taking control
In other business areas specialists are employed, finance, marketing, sales, manufacturing, and even management. In order to gain real control over these costs developing a marketing procurement function is the logical next step.
The marketing spend can be broken up into multiple areas such as print, media, PR, market research, digital etc. and yet for many the responsibility is placed on a single person to understand the complexities of each supply market and make informed decisions as to what constitutes a good deal. This is really hard to do.
At the Marketing Factory we believe that there is another way, and that marketing procurement should not only be for large corporate clients. Our work for the corporates has led us to a position where we can now offer this expertise and service to a wider group of companies, allowing them to tap into best in class marketing procurement on a shared service basis.
This is a unique offering that cuts across sectors and covers all marketing categories. Shared service procurement means that you will only use the resource that is applicable to you, and more importantly it will be expert resource in the categories you use. This targeted and focused approach will help drive value in your business and allow you to maximise your marketing investment.
We’ve put together a low cost model that allows access to a far wider group of companies, giving them a competitive advantage that up until now has only been available to our large corporate clients.
For many companies this may be the first step in taking control of their marketing investment. Its an important step and one that we see deliver massive time and time again.
Good marketing procurement will help drive costs down, but more importantly, it will allow you to drive better value from your marketing investment, helping you to grow your business.
It’s time to take the advantage back from the suppliers and put you on a level playing field with the corporates. Please give us a call and we can see how this might work for you.