Why you need to engage the market early in the procurement process
The nature of procurement means there are always other parties who have an interest in the business decisions you make. These stakeholders are affected by your procurement activities and decisions, with the selection of a particular supplier having a range of flow-on effects to both the external supply market and also the operations of the internal business unit you're procuring the good or service for. As such, engaging with key stakeholders early and often can help get the best from your procurement efforts.
What is stakeholder engagement?
Stakeholders are those who have a stake in your procurement activities. They can be divided into two camps: internal or external, with internal stakeholders being business units within your organisation and external stakeholders being suppliers or other outside parties that are affected by your procurement decisions. Stakeholder engagement is simply the process of finding out how these parties are affected by your actions and what they want from you. This is clearly going to vary from stakeholder to stakeholder, so it's important to foster the kinds of relationships that allow you to engage with all the relevant groups.
At the end of the day, procurement's function is to serve the internal stakeholders in its organisation. Broadly speaking, procurement can be called a success if its internal stakeholders are satisfied with its performance and the outcomes it is achieving for them. To achieve satisfaction from internal stakeholders, it is critical to first understand the objectives each party has regarding the procurement process and what they will deem success. This is achieved by active and ongoing engagement with key stakeholder groups. The kind of continuous engagement required to stay informed means relationships have to be built. You can start with surveys of customer satisfaction to find out how your internal stakeholders rate your procurement efforts and use that as a platform to address any issues moving forward.
A similar story can be told for external stakeholders. While their fortunes aren't tied as closely to yours, many external stakeholders will nonetheless be vital to your business. On top of self-interest, governments and councils often need to be more cognisant of their external stakeholder's needs too, as their responsibilities to the public and social good are greater than that of purely for-profit businesses.
How does stakeholder engagement improve procurement outcomes?
In a sentence, engaging with your stakeholders improves procurement outcomes because it gives you a better understanding of what those stakeholders want that outcome to look like. Without it, developing a procurement strategy becomes a bit like aiming for a target while wearing a blindfold - you just can't see the target you need to hit.
Without any engagement, your procurement objectives and your key stakeholder's objectives are likely to become misaligned. Therefore it is essential to open up the dialogue between the procurement department and the stakeholder groups it services, as when procurement becomes a strategic partner with their internal stakeholders, they are in a far better position to deliver the outcomes sought by the business unit, rather than ones that are sought on the basis of outdated or incorrect information.
Stakeholder engagement can also improve procurement outcomes by reducing any internal resistance to change. Sometimes there are cases where a supplier needs to change, for example, where there is a better deal available or a proprietary innovation that's been developed - yet the internal teams are unwilling to commit to something new. This kind of scenario can be avoided by engaging stakeholders early, and by building the relationship to the point where they're willing to listen to your arguments for change.
Engaging external stakeholders can also improve procurement outcomes in a number of ways:
- You can provide the market with adequate notice regarding upcoming tenders.
- The market and the procurement function can share information regarding changes, innovations or opportunities in the various supply markets.
- You can better understand their supply capacity.
At Procurement Co, we can help you develop a procurement strategy that best satisfies the interests of your key stakeholders. Our expert team has helped countless clients improve their procurement outcomes and better manage the relationships they have with both internal and external parties. To learn more about how we can help you get the most from your procurement, get in touch today.