One of the common mistakes we see Operating Partners make is deprioritizing Procurement in pursuit of other value creation levers. Procurement rarely drives investment theses. But where margin expansion is a value creation priority, Procurement should play a leading role in generating cash. To avoid this mistake, I’ve outlined recommendations below.

1. Assess Resource Loading. What role is Procurement playing in your value creation plans? Give them ambitious cost savings goals, push for 100-day results, and ensure they’re supporting doing their part to create values.
2. Use Consultants. If internal Procurement resources are scarce, hire a consulting partner to do all the heavy lifting. Ensure fees are linked to savings delivery and an ROI is guaranteed.
3. Get a Spend Assessment. Have consultants do a no-charge spend assessment and size savings for your portfolio company. Use this to make a data-driven decisions that influence your value creation plans.

In a market where LPs have investment options and competition for deals is fierce, the importance of value creation is of utmost importance. Amidst the various levers Operating Partners have at their disposal, Procurement can be an important tool in the cash-generation toolbox — if deployed boldly and smartly. However, neglecting key considerations can result in costly mistakes and missed opportunities. By avoiding these five common mistakes, PE firms can enhance their chances of creating long-term equity value in their portfolio companies.