Establishing Roles

The primary role of an indirect procurement team is to source all goods and services that are not for resale in order to support the operational needs of the business. The primary role of the operations team is to provide customers with products through an exceptional experience that results in return visits. Beyond the individual customer transaction, procurement works behind the scenes to support that exceptional customer experience while partnering with operations to achieve secondary but significant goals: optimizing efficiency, lowering costs, and increasing sales. When procurement and operations teams work together, the customers are the ultimate winners.

During my time in procurement, one of the first national contracts I negotiated was for office supplies. While analyzing historical spend data and usage from the incumbent supplier, I noticed an exceptionally large amount of spending on king-size Sharpie markers as I determined which items would be included in the new contract. Upon seeking feedback from operations teams directly, I learned that those markers were used throughout the warehousing of products, specifically for tasks like marking pallets and product for rotation. I then worked directly with the operations teams to trial more cost-effective alternatives before finalizing a new contract.

After a brief trial period for those alternatives, I surveyed the operations teams and received mixed feedback. The teams that used these markers at the store locations were agreeable to the lower-cost alternative. However, the teams that worked in the warehouses provided more negative feedback. Because many of them worked in coolers and freezers, the size and shape of the current Sharpie marker allowed them to store these markers in their pockets when not in use. More importantly, they were able to use these markers while wearing thick protective gloves in colder environments, whereas the alternative option required them to remove their gloves. Thanks to this collaboration with the operations teams, I was able to offer a more cost-effective alternative for store employees and negotiate a lower cost for the currently used Sharpie, providing cost savings to both teams without reducing operational efficiency and ensuring that customers continued to receive the freshest product available.

Aligning Goals

Because operations and procurement teams tend to report to different leaders, priorities and areas of focus are often misaligned. Identifying the goals of each team is crucial to ensuring cohesion between them. Consider scheduling a Goal Alignment Meeting to establish and clarify the goals of each team first.

Meeting Topic: Procurement and Operations Goal Alignment
Attendees: Procurement Directors, Directors of Operations, Directors of Supply Chain and Logistics

Agenda:

  1. Review current and future cost-saving initiatives
  2. Discuss operational efficiency challenges at the store, warehousing, and distribution center levels
  3. Identify potential impacts of current procurement projects on operational efficiency
  4. Review supplier feedback from operations teams for procurement to address directly with the supplier network
  5. Review top KPIs for each team to create a mutual understanding of performance
    a. Identify key areas of focus in the current state (priorities often cycle through various teams)
    b. Create a shared KPI (e.g., cost savings vs. operational efficiency)
  6. Identify a meeting cadence for future collaboration (e.g., monthly, quarterly, annually)
    a. Review performance of closed procurement projects
    b. Review supplier feedback
    c. Review feedback on equipment, supplies, and services
    d. Review upcoming procurement projects

Measuring Success

After this meeting, both operations and procurement leaders will have a mutual understanding of performance expectations from the business. While operations’ primary goal, outside of increasing sales, tends to focus on optimizing efficiency in the workforce—as labor is their most expensive and controllable expense—procurement teams are typically tasked with lowering the cost of equipment, supplies, and services they source. Although reducing those costs is significant to the profitability of a business, the methods used to achieve those savings often directly impact efficiency. When a procurement team understands operations’ priority of increasing efficiency, they can proactively find solutions that align with that goal while focusing on their own KPIs.

Consider the following KPIs procurement teams should track to measure success:

    • Cost savings

    • Spend under management

    • Maverick spend

    • Supplier performance metrics:
        • On-time deliveries

        • Quality scores

        • Issue resolution time

        • Lead time

    • Procurement cycle time (time taken to fulfill purchase orders and requests)

    • Procurement’s impact on customer experience (e.g., Net Promoter Score of store operations related to procurement changes)

Anticipating Challenges

Newton stated that “a body at rest will remain at rest unless an outside force acts on it.” Similarly, if a company remains stagnant, it will stay stagnant. While many stores’ needs remain constant, such as cleaning supplies and equipment, the retail environment is always changing. The only constant in the retail world is change, and companies must continuously adapt and evolve to align with shopper preferences and trends to remain relevant.

Retailers face many unique challenges. Sales spikes due to holidays and seasonality are more predictable for operations, as they have historical sales data to support their planning. Procurement, however, faces unique challenges when it comes to holidays and seasonality, since their scope of work is often on a global scale. Procurement teams must anticipate these challenges globally, not just domestically.

Driving Long-Term Results

When procurement and operations teams proactively and consistently provide feedback, they foster a mutually beneficial environment. Procurement teams can then offer suppliers greater transparency, strengthening supplier relationships. Together, procurement and operations can save time and resources by prioritizing projects that align efficiency goals with cost-saving initiatives. This synergy allows procurement teams to develop innovative solutions that keep businesses adaptive and competitive, ultimately enhancing sales and improving the customer experience.

About the Author

Andrea Gnezda is a seasoned procurement and retail operations leader with over a decade of experience, driving results across diverse roles in the retail industry. Starting as a part-time cashier, she advanced to operational leadership roles, including over seven years with ALDI USA. There, she served as an Executive Manager in National Procurement, excelling in problem-solving, RFP management, and supplier relationships, and as a District Manager, where she oversaw safety awareness, team development, and operational excellence. Her career foundation at Marsh Supermarkets saw her progress from Co-Manager to Store Manager, refining her leadership and operational skills. During the global pandemic, Andrea transitioned into procurement, successfully navigating supply chain disruptions, mitigating cost increases, and fostering collaborative supplier partnerships. Her unique blend of operational leadership and procurement expertise makes her adept at solving complex challenges, driving efficiency, and building strong, lasting partnerships.

About Varis

Varis is a one-stop shop for supplies and services stores need to run, from frontline to finance—no paperwork, no phone tag, no confusion through a powerful eProcurement platform. Their solution allows retailers to curate supplier catalogs and access Varis’s managed suppliers, simplifying the purchasing process and enhancing efficiency.

The leadership team includes Chief Executive Officer and co-founder Prentis Wilson, who previously founded Amazon Business and scaled it to a $15B+ division, and Chief Operating Officer Daniel Smith, who has extensive experience launching and scaling businesses, including leading Amazon Business for Education to over $2B.

Varis’s platform is designed to make it easy for employees to find what they need, aiming to improve profit margins and associate experience by simplifying indirect purchasing.