Agencies adapt to the new order of procurement

It is the most talked about topic in advertising over the past few years and it isn’t going away any time soon. But procurement is no longer the unwanted presence in the room for many agencies, which are developing more sophisticated procurement relationships. On the flipside, procurement itself has evolved into something much more advanced than an exercise in cost-cutting. 

Mark Pacchini, president of DraftFCB Asia-Pacific, notes that many clients’ procurement executives now want answers to the fundamental questions about the client/ agency partnership, such as who is the smartest partner, who is offering the greatest value as demonstrated by effectiveness and efficiency and how all this translates into return on investment. 

Similarly, Greg Paull, principal of marketing consultancy R3, says that for one of his company’s key clients, Johnson & Johnson, cost is only one aspect of the procurement manager’s performance review. “Others include value-added areas such as innovation and compliance and evaluation,” says Paull. “When the goals are this diverse, the procurement person has to act as partner, not an accountant.”

For agencies, the original hostility towards the procurement process has waned, replaced by greater understanding and acceptance of how the two sides can work together for the common good of the client. Key to this has been a shifting of the conversation from a cost-centred one to a performance-centred one.This has meant the need for agencies to use their creativity to explore new ways that can deliver benefits for their business partners.

“Technology harnessed well is one of the chief ways an agency can add value to a client’s business and we have invested heavily in that,” says Pacchini. “In addition, having the right people who fully understand client’s questions and issues is paramount.”

To this extent, DraftFCB several years ago established its Project Management
Office to oversee operational governance, management and implementation of initiatives for clients. 

Pacchini says the office has helped the agency standardise processes and provide constant re-evaluation of processes. “Working with procurement helps us more fully embrace a world of constant re-engineering and re-evaluation,” he adds. 

The maturation of procurement has also helped agencies become more accountable — both to clients and to themselves. “Procurement has allowed us to be rewarded fairly and correctly,” says Douglas Faudet, vice-chairman for DDB Asia. “It has allowed us to explain quickly when we are working out-of-scope. It has also made us aware of inflation and increases in the cost of living, which we can then build into contracts.”

In addition, many agencies are directly engaging with the procurement process, and in some cases agencies are training staff to engage with procurement departments. At DDB, Faudet says that procurement seminars from the agency’s most-skilled financial negotiators are “very much a part of our annual training programmes.”

Given that procurement is now as much a part of the new business pitch as the creative presentation, recognising the mutual benefit that the procurement process can deliver would seem to be the most productive way forward.

“Anyone who believes procurement is retreating is applying wishful and ambitious thinking,” says Paull. “Cost analysis is ingrained into all aspects of a company, it’s just been late coming to marketing. It isn’t going away, but the good news is that the people we deal with in procurement are becoming increasingly marketing-savvy, and recognise the need for talent more than ever before.”