How procurement can make or break an organization

Formerly relegated to a back-office function, procurement now stands as a business cornerstone. It plays a pivotal role in customer service enhancement, strategic alignment, and environmental objectives, holding the power to shape a company's success or failure.

Amidst the succession of economic, geopolitical, and environmental crises, procurement emerges as increasingly strategic in its significance. According to PwC UK Digital Procurement Survey 2024, 65% of procurement departments name cost control as their top priority.

In a post-COVID-19 environment marked by rising inflation and international conflict, strategic priorities have become more focused on cost control.

Findings from the Amazon Business 2024 State of Procurement Report  provide insights on how procurement impacts the customer journey in uncertain times, where white-glove service, reliability, responsible supply chains, and peace of mind are increasingly valuable to consumers.

What the modern procurement landscape looks like

Procurement operations have expanded in scope, facing internal challenges such as complexity in systems and processes, cited by 47% of surveyed decision-makers. Consequently, leaders are focusing on enhancing back-office operations, with 98% planning investments in analytics, automation, and AI-driven optimization.

Customer experience emerges as paramount, with modern shoppers favoring digital interactions. Notably, 38% of business buyers prefer ordering from supplier e-commerce websites, signaling a shift in purchasing behavior.

Newcastle University faced diverse procurement needs, from major equipment to everyday items, managing over 90,000 purchase orders annually. Compliance with various funding regulations was a challenge, prompting the university to streamline its procurement process. 

In 2022, they partnered with Amazon Business, which offers a simplified purchasing process, clearer invoicing, and access to pre-qualified suppliers. Amazon Business facilitated a smooth transition, resulting in high user satisfaction. The partnership has also helped drive compliance for the university, which curbed rogue spend, and simplified VAT invoicing. By having transparency at the heart of the operation it allows for greater accountability, leading to more informed decision making.

This has led to more simplified procurement, and improved the purchasing experience for staff and researchers.

Customer experience is vital for procurement 

The Deloitte report, "Customer Experience enters the B2B battlefield," highlights the importance of customer experience in driving business success. The report cites Forrester research, which revealed that companies leading in customer experience outperformed their counterparts significantly in terms of stock price growth (32% vs. 3%) and total returns (34% vs. 5%). Deloitte's own research further reinforced these findings, indicating that companies deliberately prioritizing and elevating the customer experience are twice as likely to outperform their peers in revenue growth over a three-year period.

Sustainability is increasingly integral to procurement practices, driven by evolving consumer expectations and demands. Eighty-one percent of participants now have mandates to purchase from certified sellers, reflecting a growing emphasis on environmental, social and governance (ESG) criteria. However, challenges persist in sourcing sustainable suppliers and gathering ESG information, hindering companies from achieving sustainability goals.

“Amazon Business is a B2B sales unit built upon the Amazon consumer experience,” says Anthony Jenkins, Senior Product Manager of Sustainability at Amazon Business.

Changing purchasing options

Procurement leaders control money within their organizations, which means they can influence social issues worldwide with responsible purchasing. Socially responsible purchasing involves organizations consciously operating in ways that positively impact economic, social, and environmental development. 

This approach contributes to global betterment and holds increasing significance for business outcomes. 

Uniquely positioned to direct spending, procurement is pivotal in driving organizational social responsibility goals. 

Procurement must expand its influence within the organization to effectively address complex categories, ensure compliance with purchasing policies, mitigate risks, and align with broader strategic objectives.

Procurement can evolve beyond its traditional role to become a strategic partner across the organization by delivering enhanced business value and realigning with strategic goals. According to Gartner research published in 2022, three-quarters (75%) of procurement leaders plan to expand their use of diverse suppliers significantly. 

This purchasing idea has led to benefits for companies, with analysis from McKinsey & Company, showing that top ESG performers enjoy faster growth and higher valuations than other players in their sectors, by a margin of 10 to 20% in each case. Strong ESG credentials drive down costs by 5 to 10%.

The modern procurement landscape is evolving rapidly, with an increasing focus on customer experience, sustainability, and social responsibility. 

As evidenced by Newcastle University's partnership with Amazon Business, streamlined procurement processes not only enhance efficiency but also contribute to compliance and user satisfaction. 

As procurement operations expand in scope, leaders are investing in analytics, automation, and AI-driven optimization to meet the challenges of complexity and evolving consumer preferences. With procurement's strategic role in driving business success becoming more apparent, organizations are leveraging responsible purchasing practices to achieve growth, valuation, and sustainability goals. 

As we navigate uncertain times, the importance of procurement in enhancing customer service, ensuring reliability, and fostering responsible supply chains cannot be overstated.

Originally published on Procurement Magazine.