Procurement study recommends segmenting internal customers

Segmentation is not a new concept. Many companies place both their external customers and suppliers into groups or segments, which allows them to tailor their relationships based on the value each entity brings to the company. Now in a new report, "The World-Class Performance Advantage: How Procurement Organizations are Reinventing the Stakeholder Experience," the consulting firm The Hackett Group recommends that procurement organizations also segment their own internal stakeholders or customers.

To accomplish this segmentation, the study's authors, Christopher S. Sawchuck and Patrick Connaughton, suggest, procurement organizations should start by identifying the different stakeholders they serve and how they interact with procurement. Next, they should segment those internal customers into groups based on both their value to the overall organization and their level of influence within the organization. This step forms the foundation for creating an engagement plan that is customized to the needs of each segment.

One key part of that engagement plan is mapping out which procurement liaison should work with which stakeholder group. That decision, according to the report, should take into account not only seniority (with more experienced procurement professionals working with more important/influential business groups) but also language, culture, and personality.

To improve the stakeholder experience, The Hackett Group says, these liaisons should be embedded into the business unit or line of business to ensure a more efficient buying experience, greater compliance, and quicker reaction to changing business requirements. Additionally, they should focus on activities (such as on-demand analytics and market intelligence) that the group perceives as providing a high level of value or return.

In addition to handling procurement requests quickly and efficiently, these liaisons must be able to sometimes challenge proposed purchases and recommend better alternatives. In this way, procurement's role in the business unit becomes more like that of a management consultant. "The best consultants know how to ensure that their clients are happy but can also challenge them when there are opportunities for better performance," write Sawchuck and Connaughton.

If procurement groups take the time to evolve into this consultative role, the benefits can be significant, according to the report. The Hackett Group's surveys and benchmarking database show that procurement organizations that are considered "valued business partners" achieve 68 percent higher savings than those that are seen as mere "gatekeepers" tasked with ensuring that business units comply with corporate purchasing policies and requirements.

The report can be downloaded with registration here.