Discover how procurement leaders are breaking down silos to drive significant cost savings and achieve 50% carbon reduction by aligning sustainability with cost efficiency through innovative, cross-functional strategies.
From Silos to Synergy: The Power of Cross-Functional Procurement
Procurement leaders face increasing pressure to reduce costs while simultaneously meeting ambitious sustainability goals. Successful procurement is no longer simply about negotiating prices; it’s about breaking down silos and fostering collaboration across teams and suppliers to rethink everything—from product design to sourcing strategies. This shift in mindset can lead to unexpected breakthroughs, both in cost efficiency and carbon footprint reduction.
One key lesson emerging from the experience of procurement teams like those at Volvo Penta is that true innovation happens when diverse functions work together. By aligning procurement, operations, technology, and suppliers, companies can identify opportunities previously overlooked. Such collaboration allows teams to identify where inefficiencies lie and unlock substantial cost savings that are not typically achievable through isolated efforts.
Volvo Penta’s approach has demonstrated that real gains come from looking beyond traditional supplier negotiations and instead, engaging deeply with every aspect of the production process. By leveraging cross-functional collaboration, procurement teams can find new ways to cut costs and reduce emissions in tandem—a significant transformation from the traditional, siloed approach.
Driving Cost and Carbon Reductions with Transparent Collaboration
Transparency is crucial for successful collaboration. At Volvo Penta, procurement leaders brought stakeholders to the table—suppliers, internal teams, and even external specialists—to collectively examine every part of the production process. Rigorous preparation and an evidence-based approach were the cornerstones of this transformation, ensuring that teams had detailed facts when engaging with suppliers.
This led to initiatives such as clean-sheet costing, where components were analyzed down to their basic materials and processes. Teams physically weighed parts, benchmarked similar components, and identified opportunities to improve both cost and sustainability. What made this effort particularly effective was integrating carbon footprint considerations alongside cost evaluations. As procurement teams scrutinized parts for cost reductions, they simultaneously worked on minimizing their carbon impact. This dual focus led to innovative solutions that managed to reduce both metrics effectively.
For example, the shift from non-recycled to recycled aluminum, along with changing suppliers to those using clean energy, drastically cut emissions. The use of recycled plastics instead of virgin materials and remanufacturing high-value components also led to significant improvements. In some cases, teams achieved cost reductions of 30%, coupled with a 50% reduction in carbon emissions. This holistic approach, combining cost efficiency with sustainability goals, sparked enthusiasm across the organization, including among suppliers who were motivated to innovate in response to these new collaborative opportunities.
Getting Everyone on Board: Building Engagement Across Functions
While the results of such programs are impressive, achieving buy-in across the organization is often challenging. Procurement transformations rely heavily on cultural change, which is most effective when driven by top-level support and clear communication. Volvo Penta’s experience highlighted the importance of integrating sustainability goals into the overall company strategy, with strong executive sponsorship to facilitate cross-functional collaboration.
Top management’s endorsement gave the necessary momentum for different functions to actively participate in procurement initiatives. Clear governance structures helped set shared goals, ensuring that the procurement team didn’t operate in isolation. This approach encouraged product design and engineering teams to be actively involved, allowing for changes in materials, processes, and product designs that ultimately led to more significant savings.
Effective communication and ongoing education were key components of driving this transformation. To successfully engage various teams, Volvo Penta employed diverse approaches—workshops, training sessions, and videos—to ensure that everyone understood the importance of the initiatives and recognized the benefits of their contributions. Addressing common myths, like the assumption that sustainability always results in higher costs, was also crucial. Concrete examples of cost and emissions reductions helped to shift these perceptions and bring stakeholders on board.
Another important aspect of sustaining engagement is starting with small, achievable projects and building on these early successes. Leaders should identify initial initiatives where success is likely, use them as proofs of concept, and share these “quick wins” across the organization. Once people see the benefits firsthand, they are more willing to invest their time and resources in larger, more ambitious programs.
Setting high, ambitious targets can also fuel creativity and push teams to think outside the box. High expectations may seem unrealistic at first, but they drive a level of innovation that is often absent when goals are more conservative. When goals are set ambitiously, teams are motivated to push boundaries, reconsider long-held assumptions, and contribute their best ideas.
Leading the Charge for Procurement-Driven Transformation
Procurement teams are uniquely positioned to drive cost efficiency and sustainability across an organization. The experience of Volvo Penta underscores the power of collaboration, transparency, and a dual focus on both cost and carbon reduction. By breaking down silos and fostering cross-functional teamwork, procurement can transform from a purely transactional function to a strategic force that contributes directly to both financial and environmental objectives.
The key takeaways for procurement leaders are clear: embrace collaboration, prioritize transparency, leverage evidence-based approaches, and ensure strong cross-functional support from top management. With these elements in place, procurement leaders can lead transformative changes that enhance both cost efficiency and sustainability, positioning their organizations for a more resilient, responsible future.
