Why Spend Management is Key During Times of Growth and Prosperity

Monday, August 11, 2014 , business management, by Rich Rafdahl

With the most recent economic downturn and slow recovery, we have all witnessed either personally or with companies we know well an abrupt transition from revenue growth and sales driven entities to lean and mean, cost cutting organizations and now possibly back again to revenue growth. This pendulum, depending on the market and economic conditions,  seems to swing in one of these 2 directions which can be significantly challenging for any company.  Obviously, when businesses go through the financial and economic trauma experienced over these last years, serious changes and steps were required.  Now that our economy is on the mend, I think it is time to consider a more balanced functional approach.  As the saying goes, ” a high tide covers many rocks”  and I believe these organizations are doing a disservice to themselves and are not fully optimizing the potential of their business since key expenses and programs are allowed to go on autopilot.  Prosperity can sometimes blind companies to the potential savings and additional margin opportunity that exists within their own organizations.

As a procurement consultant that has the highest regard for Sales and Revenue, I believe that the most successful, competitive and profitable businesses are those who value both revenue growth and expense management. Unfortunately, I often find companies that are so focused on revenue growth and sales, during periods of growth and respectable profitability,  that the purchasing departments act more as an administrative function responding to the needs and demands of the sales and other staff.

DSCN0055I understand how these internal business attitudes develop, especially if the purchasing staff is not considered strategic, effective, resourceful and pro-active within the company. On the other hand, when a procurement and supply chain team are staffed with talented professionals and are in sync with the sales staff and sales objective, it can be a powerful combination punch. Having both entities supporting and complimenting each other in their respective roles really can make a incredible difference. Optimally, Purchasing should be providing the Sales and Marketing teams with new ideas, lower costs and strategic suppliers that offer a distinct advantage to the business with great prices, services and products.

With some businesses, the Purchasing staff may the primary connection to the supplier community as well as to the newest cutting edge products and services that are being offered. As such a responsible Purchasing team should be in a credible position to pass this information onto Sales and Marketing – since these new ideas can offer a potential new product offering or competitive advantage.   In addtion, the Procurement team should be on the constant look out for ways to eliminate unnecessary costs while improving value.

On the other hand, Sales should be informing Purchasing of their objective, market plans, unique customer requirements and longer term goals so that both teams can develop a mutual strategy and action plan to meet their customer needs and fulfill the company’s objective. Ideally, both Sales and Purchasing should meet regularly to ensure they are working in concert, maintaining healthy lines of communications, providing updates and achieving the desired results.

Great companies have moved away from an attitude where Sales is the primary driver of the business and have realized the huge benefit that a well oiled Procurement and Strategic Sourcing team along with the other key areas of the business can offer. They have learned that when all critical functions of the business work in a respectful collaborative fashion – the stage is set for A DISTINCT COMPETITIVE ADVANTAGE.

Again, I realize that nothing happens until something is sold, but it is a game-changer when there is a team of excellent people fully engaged and supporting the Sales staff with great products, services and lower costs creating an outstanding value proposition for the market. There is an old saying I heard years ago “That something well bought is already half sold”. I believe if a company invests in effective cost management and strategic procurement as much as strong sales team, progressive marketing and business development, efficient operations – revenues and profits will be significantly enhanced.

Leave a Reply