It’s that time of year when C-suite leaders reflect on the commercial plans of the businesses they look after. For those steering the ship in the equipment hire sector, it is an especially weighty responsibility. In this sector, top businesses grow through market share, but this can be difficult to achieve in such a competitive market with tight margins and pricing that is highly sensitive.
Leaders will be wise to view their commercial plans through the lens of inter-team dynamics, with a particular focus on the relationship between finance and procurement. A modern procurement strategy should support revenue growth – not just cost control – while enabling long-term supply chain optimisation.
Why rebranding procurement is critical for growth
Complexity between finance and procurement teams stems from a common interest: saving money. Traditionally, procurement’s mandate has always been to cut costs. So, for many years, the function has reported to finance.
Today, however, the role of procurement is changing. Organisations are increasingly rebranding procurement as a strategic function that adds value beyond cost reduction. It now drives advantages such as quality and supply availability, both of which directly and positively impact revenue.
This value is achieved largely through strong supplier relationships – a cornerstone of an effective procurement strategy.
Supplier relationships and supply chain optimisation
Supplier relationships are delicate. Applying competitive pressure versus squeezing suppliers too much can be an extremely difficult balance to strike, and not forgetting the fact that kit availability is always king!
Despite this sensitivity, procurement teams in the equipment hire industry have historically leaned toward aggressive cost tactics. These traditional (some would say ‘conventional’) ways of working are now counterproductive in today’s marketplace, where supply chain optimisation depends on collaboration rather than confrontation.
The power play between buyers and suppliers has shifted. In today’s landscape, demand is high and ready supply is low. Simply put, suppliers can set the terms. Procurement no longer has the luxury of pushing suppliers on price and driving them to quote for endless tenders that may or may not materialise into contracts. Working this way doesn’t endear buyers to suppliers. What’s more, in this new order where suppliers get to choose which businesses get their precious supply, it has become a risky strategy.
In practice, pushing suppliers too much on price is getting in the way of how businesses are able to serve their customers. For instance, if suppliers don’t provide equipment on time, the business’s operations and further sales cycles have to stop. This exposes the business to poor word-of-mouth. And from this point, it’s a slippery slope, because when reputation suffers, so does profit.
Aligning finance and procurement to enhance margins
The time has come to revise how finance and procurement teams should work together, keeping suppliers in mind. Leaders must shift their mindset, shifting the focus from cost cutting in isolation to one of margin enhancement, by leveraging the talents of procurement and finance as one team… the mantra of ‘you can’t save yourself for prosperity’ has never been more valid.
For procurement, this means being collaborative. It’s about treating suppliers as equal partners, setting common goals with them and working together as one to succeed. If organisations can commit to rebranding procurement, the function becomes aligned with sales and revenue generation while remaining aware of supplier pressures such as margins, time constraints, and operational needs.
Setting up your business for long-term prosperity
When procurement is established as a revenue-aware function, buyer–supplier relationships can thrive. From this position, the function can leverage the relationship far more successfully when it needs to secure equipment for customers. By extension, every other department in the business can do what it takes to build revenue. For example, sales teams will find it far easier to sell, safe in the knowledge that any potential wins can indeed be fulfilled.
Additionally, if there’s a win-win culture, happy suppliers will be more likely to collaborate with procurement and find solutions for growing revenue. With robust supply chain optimisation and suppliers firmly on board, who knows what can be achieved?
So, as leaders prepare to plan for financial success this year and beyond, they must be mindful of the relationship nuances between finance, procurement and suppliers. Those who can get the trio working in the most profit-minded way can set up their businesses for ongoing prosperity.