Is it time to stop hating the procurement department?

A word cloud of the phrases most commonly associated with marketing procurement services might quite likely feature “doomed”, “off to the tower” and “bad reputation” writ large. 

Procurement’s delicate relationship with both agencies and marketers means they’ve typically been no-one’s best friend — and this doesn't appear to be changing.

“We’re confronting two different types of populations,” explains Olivier Levy, managing director of Dragon Sourcing, a procurement services provider covering a range of industries including marketing. “The creative people receive a message from God, basically. They’re people with long hair, very open to innovation, something like that. Procurement are more related to the industry, more horizontal.” The groups have little in common, he continues, and like to criticise each other usually for being too slow (creatives’ retort at procurement) or too costly and opaque (procurements’ return shot at creatives).

PepsiCo famously axed their marketing procurement department in 2015, and apparently hasn’t looked back since. So as the industry continues to evolve at pace, does the function still have a place in the marketing value chain today, and where?

The ‘bad’ ones v the ‘good’ ones

“In general the relationship between the three groups [agencies, marketers and procurement] is not great,” affirms Tarandeep Singh Ahuja, who heads McKinsey’s procurement practice across Asia-Pacific. While there are different challenges by company and sector, he continues, the biggest difficulty for all is trying to align their objectives.

“The marketer’s function is to get the brand property out there and to drive sales, typically with a budget to work around. The procurement person is less about perspective, more about how to manage the costs and stick with preferred suppliers. Creative’s objective is be creative, but also to try to make money.”

Representing the agency view Leigh Terry, CEO of IPG Mediabrands APAC, agrees that mismatches can occur. In his opinion most procurement people can be categorised as either “good” or “bad”. The ‘bad ones’ will act as “blunt instruments”, purely focused on costs at the expense of effectiveness, he says. “Marketing teams want the A team on their business, but if procurement look to pressure for the individuals on C team wages, then there is definitely a disconnect.”

Some of the better ones that I’ve worked with who have an appreciation for what is good, as opposed to what is just cheap, are those who have either run marketing departments or been senior within them

This in turn can filter down to agencies: Terry thinks that in certain instances it is fair to say that some CMOs roll out the excuse of procurement to account for lower agency budgets. “No-one likes giving bad news conversations. It’s an interesting relationship between procurement and marketing. When it works phenomenally well, they’re joined at the hip, they’ve got shared goals, common goals and work really well to a joint end. I think where it has come unstuck is when marketing and procurement aren’t aligned. Marketing decides to go down one route and then procurement goes and negotiates and it is left between agency and marketing to almost try and deliver the impossible.”

Joe Wong, general manager of Integrated Marketing Services at George P. Johnson Experience Marketing, disagrees that CMOs hide behind procurement to cut costs, however: he thinks most CMOs aren’t focused on savings but are more concerned to see success delivered against their brief, meaning it is even more important for the three groups to work in line to shape both deliverables and performance measures.

Years of experience within their specific sector of the industry is one factor that tends to make for good procurement staff, Leigh continues — but a background on the other side helps as well. “Some of the better ones that I’ve worked with who have an appreciation for what is good, as opposed to what is just cheap, are those who have either run marketing departments or been senior within them, or even on the agency side before shifting across.”

This gives procurement departments an appreciation that business performance has a strong link to creativity, Leigh thinks; that innovation is “a massive factor” in the disproportionate delivery of ROI. “Sometimes those are the things that tend to get cut if the procurement starts to cut muscle where they perceive there to be fat.”

Procurement’s necessary evolution

As it has in the rest of the industry, the function of procurement has changed dramatically in recent years, presenting various opportunities for the crooked relationship with agencies and marketers to straighten out.

“In my early days, procurement [was] a black box,” recalls Wong. “It [was] near impossible to know what they are looking for beyond price discounting. This still happens with those who newly join the procurement role, but I find the situation evolving.”

Wong says that he’s seeing progressive new buying approaches that involve multi-year contracts with structured arrangements for bringing in new tiers of partners at different project stages. “This eliminates the stress on procurement to know everything, and they can then fully leverage on experts on vertical buying,” he says.

The speed and frequency at which we now communicate is another factor that’s produced a need for procurement to evolve. The best procurement chiefs are those who within their own organisations are asking for training with their marketers and agencies to understand the processes behind new digital campaign strategies, thinks IPG’s Terry: “They certainly are the ones who ask the right questions. Sometimes they are the hard questions, but at least they get to the right answer.”

On the other side of the fence Sarah Millard, the Shanghai-based procurement director of Coca Cola, says such rapid developments in areas such as virtual reality and content production mean her department now has to work according to a priority list of what drives the most business growth. “As our Chief Growth Officer said, we cannot go after everything that is ‘shiny and new.’ This requires even stronger collaboration between marketing, finance and procurement from business strategy and planning all the way to execution in market, ongoing performance management (P4P) and ROI analytics.”

Millard is keen to stress that procurement can add value beyond the commercial by helping simplify work processes. Coca Cola introduced a ‘Collaborative Procurement Model’ four years ago to help empower the brand’s marketers to make more agile decisions more quickly, for example by reducing multiple sign-offs and approvals. The company is also investing in systems and tools to help them “standardise, simplify and automate”, enabling them to give marketers fact-based information that supports faster decision making, she says.

Procurement’s job has definitely got more nuanced and complex, agrees Ahuja, but analytical tools such as those offered by Google and Facebook are starting to facilitate the process of assessing where value is and isn’t being added. “In the old days, there was a lack of clarity around who is creating what value”, he says. “We’ll see a trend towards more fact-based targets being set, better accountability and more focus on the value.”

Procurement departments in Asia are embracing analytical technologies at different paces, explains Ahuja. He’s attended half a dozen McKinsey-hosted roundtables for Chief Procurement Officers around the continent in the last year, he says, and sees the most movement — some real, some ‘perceived’, he acknowledges — to adopt new digital and analytical technologies in India, Australia and, to a certain extent, Southeast Asia.

In China, South Korea and Japan, adoption is slower: Ahuja’s hunch is that businesses in these countries tend to be slower at innovating and adopting new practices. Social conventions play a role too, particularly in Japan and South Korea: “In those two countries the culture is also quite humble, so if they say they are behind compared to one of the other countries who says they are far ahead, the truth is somewhere in between.”

The crystal ball for procurement

Sarah Millard at Coca Cola says that as a marketing procurement specialist, the biggest challenge she sees ahead is “ensuring that we have the right procurement structure, capability and training as the business and industry constantly changes, especially in areas of digital and marketing IT software and data analytics.”

Procurement could be able to shed its reputation as a slow department if it can implement improved systems that help remove what Millard calls ‘non-essential tactical work’, allowing teams to prioritise strategic projects. “Marketing Procurement now requires subject matter experts that are pragmatic, able to simplify complex situations and adapt fast to market changes to ensure we deliver results,” says Millard, touching on one of the other big themes frequently discussed as a hurdle within the procurement world — talent.

This is “scarce, to say the least”, says Ahuja. While procurement’s increasing complexity has made it a more interesting place to work, it still isn’t attracting the same level of talent as the marketing function, he says.

Procurement may be improving its lot in the value and speed camps, but a lack of talent across Asia suggests another reputational problem looming. “Procurement is beginning to be more visible, there is more of a spotlight on it, but it's still not the cool place to be,” sums up Ahuja.

You can now register your interest for Campaign 360 2019, which will take 'value' as its central theme. The event will take place on March 5 at the Capella Hotel in Singapore. campaign360.asia