Rémi works at Mirakl and Kevin at Swile – both are Procurement Managers. The goal of this interview is to share their expertise and experiences in building a Procurement team: when to hire, how to structure the team, set goals, and create an effective savings strategy.
When is the right time to make your first procurement hire?
Hiring your first buyer is a strategic decision. According to our experts, Rémi and Kevin, it usually happens when a company reaches a threshold of recurring expenses (starting from 15 million euros) and several key factors come into play:
- Growth: Once monthly purchase volumes justify it, bringing in a Procurement expert to optimize spending becomes essential.
- Risk management: Procurement helps manage risks such as compliance, quality, and contract delays.
- Financial goals: Whether preparing for an IPO or seeking to improve profitability, a dedicated Procurement function becomes indispensable.
What success should you expect from this first hire?
Once in place, the Procurement Manager must quickly demonstrate their value. Achieving a few "quick wins" is key to justifying the investment and ensuring a smooth transition.
- Visibility: Mapping and understanding internal spending is a priority.
- Processes: Formalizing procurement processes.
- Negotiation: Negotiating with suppliers to achieve savings on major spending categories or large contracts.
- Overall ROI: From the first few months, the focus is on generating savings and showcasing a clear return on investment through optimized management.
How to prove Procurement’s value internally?
Convincing the CFO is crucial, but according to our experts, gaining the support of other teams—those who frequently purchase—is equally important. Here are three key points to demonstrate procurement's value across the company:
- Spending audit: A precise audit of purchases helps identify immediate savings opportunities.
- Building trust: By delivering quick results on a specific project, the buyer demonstrates their strategic role and earns the trust of operational teams.
- Education and awareness: Other teams need to be engaged to understand the positive impact of Procurement, not seeing it as just an “additional process” or an obstacle to spending.
What objectives should be set for the first 18 months?
The first few months of a Procurement team should focus on key performance indicators (KPIs). Here are three major goals:
- Spend coverage: Maximize the percentage of company spending managed by Procurement.
- Process optimization: Improve procurement flows (lead time) and negotiate contracts effectively (especially for software—control the number of licenses vs. actual tool usage).
- CSR and compliance: Increasingly, Procurement plays a role in reducing carbon footprints and improving product compliance.
Definition and types of “Savings”
Savings are often misunderstood within companies and finance teams. Our experts clarify the different types of savings and how to calculate them. Below is a summary chart:
- Baseline comparison: Direct savings compared to the previous year.
- Budget comparison: Compare actual spending to a pre-set budget.
- Cost avoidance: Reducing an identified potential cost, even if there was no baseline or budget.
How does the concept of “Savings” evolve over time?
The definition of savings evolves as the company matures. In the beginning, the focus is on direct savings.
The initial steps involve targeting large purchase volumes and immediate cost reductions. As Procurement matures, the team focuses on optimizing resource usage and pooling suppliers.
How to build a Savings strategy?
Building a solid savings strategy involves several key steps:
- 1 - Spending audit: Identify the biggest savings opportunities.
- 2 - Mapping: Prioritize purchasing categories based on their weight and associated risks.
- 3 - Alignment with teams: Ensure that Procurement’s objectives align with the company’s needs and budget constraints.
- 4 - Relationship building: Create strong internal partnerships to involve Procurement in strategic decision-making.
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To view all the short clips featured in this article and the entire interview with Bryan, please check out the full YouTube playlist just here.
To speak with a Payflows experts and understand how Payflows solution can help your Procurement team to save money, ensure adoption, gain time and reduce risks, book a demo just below !
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