Treat Purchasing Opportunities as a Business Idea

The creation of an entrepreneurial procurement function calls for three elements grabbing the entire company s attention with an attractive entrepreneurial value proposition, capturing the opportunities through a comprehensive program, and building the necessary long term capabilities (Fig. 11.4). This approach has 

Captivate the Company s Attention Create an Entrepreneurial Value Proposition 

Procurement managers can captivate their company s attention by defining purchasing decisions as an entrepreneurial value proposition. To this end, they need to specify and formulate the value contribution made by purchasing to the company s overall business challenges. They then need to quantify the value added by various improvements in procurement, and to allocate that value to each function or business unit (Fig. 11.5). Value in this sense means the optimization of cost and quality over the lifetime of a purchase, getting more for the same price (addi- 

To capture the business opportunities, the procurement team then needs to build a holistic business plan. The business plan mentality is critical, since it will provide the organization with a clear proposal and basis for the decision to allocate necessary resources to the planned efforts. Organizations that have pursued such an approach have created the prerequisites for performance transparency and service-oriented behavior. Possible outcomes depending on the needs of the company and the capabilities developed within procurement can range from a strong procurement network with its own profit and loss statement and balanced scorecard to the creation of a market-oriented profit center unit. The business plan should be focused primarily on value creation rather than cost savings, and should consist of two distinct parts  

It should always be on the lookout for win-win ideas which will generate additional value with suppliers and should try to include sticks as well as carrots in the framework. For example, organizations should aim to build in price adjustments for those suppliers who fail to deliver value. 

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