How Procurement Can Negatively Impact Agency Performance

Kim Walker

Kim Walker 0Comments

Posted: 05 Aug 2016


The purchasing or procurement function has risen out of nowhere over recent decades. It is now seen as the critical arbiter in the selection and management of suppliers, including marketing communications agencies.

At Aprais we work closely with both marketing and procurement departments of some of the world's largest marketers. What is clear to us is that when animosity between these two internal departments spills over to the agency relationship, it can seriously demotivate the agencies. This leads to poor productivity and weakened ROI, the very things that procurement is charged to enhance.

In this article; Maximizing marketing value through smarter procurement,  McKinsey points out that “Marketers don’t always recognize how their colleagues in procurement can best assist them, so they tend to relegate its input to the final negotiating and contracting stages of the purchasing process, when there’s less opportunity to add value”. On the other hand, “Procurement doesn’t always communicate its capabilities clearly, so it is perceived as a barrier rather than an enabler”.

This antagonism often spills over to the suppliers and can taint the delicate relationship between marketer and agency.

McKinsey identified six ways a high-performing procurement function can help fulfil key marketing needs. Points worth sharing and noting;

Manage suppliers

Marketers need to verify that suppliers (agencies, in many instances) are financially viable. They need to negotiate competitive rates and robust contracts, to ensure that suppliers deliver what they promised, and to see that they get paid on time.

Monitor efficiency

Marketers need to understand the performance of their agencies. The procurement function knows how to track and monitor the efficiency of both the agencies engaged and the media they place. It also knows how to lead supplier reviews.

Play the bad cop

When agencies perform poorly, the procurement function can lead the tough conversations, so that marketing teams maintain close and productive agency relationships.

Find the right capabilities

Marketers must have agencies that can meet their current and expected needs—and bring them the best of the market by meeting needs they didn’t know they had.

Create more value

Marketing efforts must focus both on quality (capabilities and fit) and on cost to deliver maximum value. Using marketing-return-on-investment (MROI) data, the procurement function can do all this by creating balanced scorecards that, for example, track both the efficiency of ad purchasing and the effectiveness of the resulting placements.

Move quickly

Marketing is changing rapidly, and the digital revolution is a key driver. Marketing teams need to respond. Working closely with procurement allows them to develop rules of the road that permit flexibility and responsiveness while controlling risk.

 

Of course, we’re delighted that most of these points relate directly to the Aprais offering.

In conclusion the McKinsey article offers this advice to Chief Purchasing Officers; “The challenge for CPOs is to demonstrate to their marketing colleagues that procurement’s contribution is not only useful but also vital and to forge new, intensely collaborative relationships capable of delivering that contribution in a dynamic, rapidly evolving environment”.

Well said!

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