Pondering procurement's future in Munich
A day-long workshop with a group of procurement executives in Munich and the folk from consultancy firm H&Z offered a great opportunity to consider some of the more pressing considerations our profession faces.
Labelled the 25+ Procurement Athletes’ Think Tank, we explored several different themes throughout the day, including collaborative value creation and Supplier-Enabled Innovation (SEI), digitalisation, next-generation talent and skills initiatives and the 2025 vision for our function, among other topics.
Of course, what made the discussion particularly valuable is that all the subjects are inextricably linked – digital transformations are all well and good, but unless we have the right people to support and drive them, they won’t go far. The same goes for SEI initiatives and deep supplier-collaboration efforts.
A great number of issues were covered, but it’s worth exploring some of the concepts in a more detail here.
1 – What is our purpose?
Having been on the road visiting various procurement teams this year, one thread of conversation always seems to hit a nerve, and that is to try and understand our fundamental, underlying purpose; our raison d’etre. Why do we continue to exist and what value do we bring to our organisations?
There was a deep discussion among participants about whether, in the years to follow, senior leaders would look at the current procurement structure and, on reflection, go about dismantling it. Why have a central function, focused purely on procurement – surely the capabilities could and should be distributed around the organisation to those who actually need to use the stuff we buy.
This hypothesis leads to much soul-searching, but also to some creative thinking. After all, if the procurement function in its current guise may not be around for the long term, what do we need to do to ensure we still have a job in ten years’ time?
2 – Driving new value
One of the companies I visited recently is Dutch chemicals and life-science business DSM, where I presented at the global procurement conference. DSM has a pretty concise and meaningful procurement vision which is focused around ‘unleashing the power of supplier capabilities’. It’s easy to say, but difficult to do because more often than not procurement is focused on ‘controlling the behaviour of suppliers’.
I argue that while we are in such a privileged position, we must do much, much more if we are to unleash the ‘power’ that DSM refers to. It’s about being open to new ideas, about being longer term in our thinking and about being less paranoid about collaborating deeply with externals. It’s about being willing to experiment and to fail fast.
3 – new talent & new structures
All of which leads to a couple of conclusions. First, we need the right people in procurement to drive this behaviour and, second, we need the right infrastructure and structure to do it from.
I can see the central approach to procurement becoming less ubiquitous in future as company leaders see greater value in local or regional approaches. Better use of data and digital technologies can still drive leverage and scale without the need for a central function, for instance, and the added flexibility and choice handed to local markets can lead to much improved customer value.
We’ve been discussing for some time, and in various forums, what the future has in store for the procurement function, and not all of it has been entirely realistic, both in terms of the predictions themselves nor the timelines.
But it’s worth spending some time mulling over what might be different in 2025. Will procurement capability be embedded into corporate toolkits and digital dashboards, for example, allowing users to order what they need easily and without the need of a central function?
Which procurement processes will no longer be dealt with by humans? Negotiation? Market intelligence? Purchase to pay? Risk management? Supplier qualification and onboarding? The list might soon get quite long.
While I certainly don’t think that the future is bleak for procurement, I do think that the future is different. We need to plan for this, and the time to start thinking about it is now.
David Rae