By Chris McGraw
“We have to serve our customers!” You hear it all around you. It sounds like you’re in the sales department. But you’re not. You’re in procurement.
In procurement departments at companies of every size and in every industry, the word “customer” is often used to mean the internal stakeholders and end users of the materials and services being procured. “Customer” seems like a benign buzzword, and perhaps even enlightened. It’s not. This pervasive misuse can affect a procurement department’s self-perception, culture and effectiveness. Calling end-users “customers” is bad for procurement, bad for the company, and even bad for the people you are calling your “customers.”
Our premise: The role of procurement is to obtain, at best value, the materials and external services the corporation requires to create shareholder value.
Here’s where the trouble starts: American popular culture, as a function of the consumer economy, is steeped in the conviction that “the customer is always right,” and that offering Nordstrom-esque “fabled service” is ennobling. Customers shop, customers choose and customers are the arbiters of value.
Talking about procurement’s “customers” muddles the fact that the corporation is the customer in the transaction, the outside supplier is the seller and procurement is the corporation’s agent.
Such talk relinquishes procurement’s role as seeker, architect and guardian of value. It replaces what should be a collegial, collaborative end-user relationship with one that is subservient. Finally, it ignores the fiduciary role of procurement and diminishes it to operational enablement, eschewing shareholder value creation.
If procurement adopts the attitude that end-users are “customers,” then it reduces itself to a catering service. That hardly fits the role we defined in our premise as stated above. That’s bad for everybody.
— Chris McGraw is managing Partner of Procapture, an executive advisory that reduces costs and improves performance in procurement and supply chain. Procapture’s partners are veterans of the elite consulting firms and former executives at Fortune-500 companies.