Choosing the right service provider often requires decision makers to look beyond their immediate needs – even when sourcing companies providing point-based or product-specific solutions. In retail – and even more so in technology – the rate of change often necessitates a more strategic approach to vendor selection. Before executing final contracts, companies should use an extended scorecard for evaluating potential solution providers. In addition to the traditional scorecard, which is typically used for evaluating immediate-need products and/or services, the extended scorecard should include several intangible items such as the vendor’s approach to innovation, culture, agility, etc. These intangibles are even more important when committing to a service provider via multi-year contracts. Companies taking myopic views of their solution-provider candidate pool may satisfy their immediate needs. However, by not considering the near-tern and long-term ramifications of their choice, they may discover they are misaligned with their original “vendor of choice.” For example, a provider not fully committed to technological innovation may become functionally irrelevant – even obsolete – despite having a multi-year contact in place.
In the coming years, perhaps even months, the procurement process will move beyond its traditional role of “purchasing tactician.” While purchasing products and services will remain a key function, procurement will become ingrained in the organization’s strategic efforts. Procurement department heads, having a better understanding of their company’s strategic objectives, as well as its strategic plan(s), will use a wide-angle lens when sourcing suppliers. Their expertise will extend beyond the procurement process provided they have in-depth, cross-functional knowledge of their organization’s operations – and how each functional silo supports the company’s strategic objectives.
Procurement, empowered by this diverse knowledge-base and longer planning horizons, will begin “connecting-dots” that improve productivity by selecting solution providers that satisfy their immediate needs AND are aligned with their company’s longer-term objectives. On the flip side, procurement’s transformation to strategic intermediary will require solution providers to be more agile and innovative as their offerings are likely to require integration with multiple departments, technologies and datasets.