The right mix of competences enable procurement departments to innovate

When procurement departments in Danish companies are incorporated as strategic partners - both within the company and in relation to external partners – they contribute to creating innovation. Such are the results of a new study based on 321 companies.

2015.09.01 | Julia Rolsted Stacey

When a company takes its procurement department into account and allows it to influence the company’s strategic initiatives, it greatly benefits the entire company’s ability to innovate and elevates the company’s procurement competences. Competent purchasers possess valuable knowledge that they can bring into play if they get to collaborate with internal and external partners, and through strategic procurement, purchasers can help foster innovation in a company. Such are the results of a new study conducted among 321 Danish manufacturing companies by Astrid Hanghøj from Aarhus BSS at Aarhus University.

The purpose of Astrid Hanghøj’s research has been to study the competences that characterise a skilled purchaser in a manufacturing company.

Strengthening procurement activities

Astrid Hanghøj’s research suggests that it is the combination of skills within a procurement department that determines a company’s success. In the survey, 19 companies stood out. Astrid Hanghøj refers to these companies as “top performers”, because they delivered far better results than the average company in the study. “Top performers” stand out because they are better at innovation.

But 19 companies out of 321 is not a lot. Many manufacturing companies would benefit from taking the company’s procurement activities into account, when they collaborate within the company and with external partners.

Astrid Hanghøj concludes that the most decisive aspects for a company trying to streamline its procurement activities are: being able to integrate its procurement activities, controlling relations, staying up-to-date on new developments in the market and having the ability to innovate.

  • Integrating procurement activities is an internally oriented activity, as it refers to the ability to integrate procurement activities with other departments within the company. The procurement department possesses knowledge and skills that can contribute to changing and improving the products.
  • Controlling relations refers to the purchasers’ ability to control and survey supplier relations. This competence is externally oriented, as it implies collaborating with several partners outside the company. The purchasers may contribute to identifying potential changes in single components or using their insight to innovate and change the ways in which the company joins specific components.
  • Orientation in the market refers to the purchasers’ ability to stay up-to-date on new developments in the market. Purchasers who are skilled at gaining an overview of the market, e.g. by participating in trade fairs, can use their knowledge to improve the company’s products.
  • Ability to innovate is about being good at seeking out new ideas and be ready to take on change. It is crucial to have the drive to challenge business as usual.

But according to Astrid Hanghøj, strategic procurement is not an easy thing to come by. Whether a procurement departments is able to take its skills to the next level depends on whether the employees have a complex understanding of the three competences: integration of procurement activities, controlling relations and orientation in the market.

“If you’re able to secure these competences within the company, it will pay off., because it’s difficult for your competitors to discover your company’s internal competences. It may require a great investment to build up strong competences, but this is where the company stands to gain a lot,” explains Astrid Hanghøj and proceeds:

“As soon as one of your competitors discovers your company’s competitive edge and manages to copy it, it becomes a competitive necessity.”

Adaptability is crucial

The study also shows that strong and complex skill sets among purchasers combined with a high level of adaptability are key aspects that contribute to giving the company a competitive edge.

According to Astrid Hanghøj, a company needs to relate to the world in which it operates. If a company just settles for copying its competitors, then it will get into trouble at some point. A company must be able to adapt to new circumstances and to evolve in the same pace as its surroundings.

Astrid Hanghøj’s research shows that up to 50 per cent of a company’s turnover is used on procurement from suppliers. If you are able to target your procurement activities and think strategically, then you will potentially be able to save a lot. However, there are a number of other levers to pull on within a procurement department to make things happen.

Facts about the study

  • 321 Danish manufacturing companies participated in the study. All of these companies had more than 50 employees.
  • The study will be published in the journal International Journal of Procurement Management in 2015.
  • The article was written by Astrid Hanghøj in collaboration with Professor Niels Peter Mols from the Department of Economics and Business.

 

Further information

Astrid Hanghøj

Astrid Hanghøj
astridhanghoej@gmail.com

 

 

 

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