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Procurement Strategy Beyond Savings

Monday March 12, 2018


Procurement has been a key part of supply chain management for decades. However, the concept is a relatively new trend for law firms - the sector in which I work - where traditionally, procurement departments have existed as a way to contain costs. But with increased pressure from clients, law firms are forced to use procurement for functions beyond savings -- including mitigating risk and implementing effective security controls. To address this issue, I wanted to learn more about how procurement works in supply chain and then apply the insights I gain in order to improvement procurement across sectors.

The first thing I discovered was the importance of creating a clear value proposition by educating and promoting procurement skills and capabilities early and often. Collaborative partnerships must enable all parties to bring to the table different expertise and skills sets. Likewise, to drive value for the firm, the function of a procurement professional must be viewed as a trusted advisor who has capabilities that complement and align with other business functions.

Next, no matter your industry, effective procurement requires focusing on the things that matter most. Risk mitigation and effective controls are two key areas where leaders are increasingly wanting procurement professionals to focus. The average law firm works with several thousand suppliers, yet only 42 percent of firms have a formal third-party risk management policy in place, according to the “Law Firm Procurement Roundtable Executive Summary.” From a foundational standpoint, it is important for firms to have visibility into their supplier relationships, including understanding potential exposure, managing contracts and having processes in place to monitor the relationships. Additionally, the ability to strike that perfect balance between day-to-day practice group requests and broader, firm-wide strategic initiatives is challenging. Prioritizing requests based on value — as opposed to department, person or supplier — can help shape a strategy that elevates the impact of the procurement function. 

I also identified supplier diversity programs as essential. Increasingly, clients are asking their law firms for supplier diversity information and statistics as part of their requests for proposals or in conjunction with outside counsel reviews. However, according to the executive summary, only about half of law firms surveyed said they have such a program in place. Of those firms that do have a supplier diversity program, 89 percent are tracking supplier spend, but only 11 percent have established targets. This demonstrates that most supplier diversity programs still are in their infancy. It also highlights an opportunity for firms to differentiate themselves in the market.

The last takeaway I’d like to offer is the benefit of leveraging technology to expand capabilities. As procurement teams increase their scope of responsibilities, they must find ways to become more efficient in order to meet growing expectations and demand. Technology is widely being used to automate aspects of supplier relationship management, help manage risk, support controls around contracts, increase visibility into spend and provide digestible reporting to leadership. Procurement functions that can demonstrate increased savings through negotiation tactics, as well as reduction in maverick spend, can build a case for why the savings should be reinvested in enabling technology. Furthermore, while procurement technology may be owned by procurement, it should not be limited to procurement. By thinking beyond how technology will directly benefit the procurement function, procurement leaders can consider and communicate about how other business functions and stakeholders could benefit from the solutions.

Identify ways to develop procurement processes that not only manage costs, but also mitigate risk, deliver a high level of service, implement effective controls and enable other internal functions to maximize core capabilities. These capabilities are essential in any field or industry.


Learn more from HBR Consulting’s “Law Firm Procurement Roundtable Executive Summary” here.

Clay Fox is senior director at HBR Consulting. He may be contacted at cfox@hbrconsulting.com.




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