Is Procurement Suffering An Identity Crisis?
In my 15 years of working in end to end supply chain, there has been a huge amount of change and flux, however none-so-much as procurement which has gone through more face-lifts than Michael Jackson since the early 2000’s.
Much of this change makes sense and can be attributed to the evolution of what is still a fairly embryonic industry; The growing businesses who recognise the need to change from a transactional to a strategic based procurement process, the large, matrix internationals who see the benefits of a centralised procurement structure, the growing understanding of the need to address indirect procurement costs as opposed to just direct.
Whilst I believe that many of these changes are done with purpose, and as part of a well-thought-out plan, I have also encountered a worrying trend in some organisations who appear to restructure their procurement function every 2 years or so. To my mind, this suggests less of a strategy, in fact more of a lack thereof. Whilst change is good, surely any change needs a sustained period in which to embed any new processes and ways of working? Can a procurement function encountering such consistent change ever be given the chance to be effective?
So why is procurement experiencing this flux? As I mentioned, some of it is in reaction to the changing needs of a business, but not all reasons are good and I believe that there is still a huge lack of understanding of what procurement actually is, what the benefits are of a strong strategic AND operational function, and the value and impact a functioning and effective procurement department can have on a business.
Too many people still do not understand that procurement is NOT just purchasing. Effective procurement is about far more than just buying things, procurement professionals are not just there to raise purchase orders and chase suppliers for a delivery. The days of the stereotypical purchasing manager, banging his fists on the table to get the price are in the main, over. Good procurement professionals are relationship builders, diplomats, negotiators, business leaders who understand risk and how to mitigate it, and who understand the bigger picture – not just how much something costs and if they might be able to get it cheaper elsewhere.
So why are business colleagues not getting this? First of all, it’s that change management piece – I am witnessing this first hand at the moment. My business is one of 27 recruitment companies who are part of a larger investment group. Until recently we have all been responsible for our own purchases, but as the group has grown, it has become recognised that if we consolidated some of our spend on things like office furniture, stationary etc. we would save money to benefit each individual business. Common sense you would think. However, people do not like giving up that control. Whilst a great idea in theory, rolling it out in practise and stopping Owner X from buying coffee from his mate in the paper shop and claiming it back on expenses is much harder. Organisations need a strong procurement leader who can win the hearts and minds of their stakeholders and get them on board, and to delegate to other key personnel who will cascade this message through-out the business.
Secondly I think there is still a belief, a fallacy that purchasing is ONLY transactional. People who do not work in purchasing do not understand procurement. The solution? We need to educate them! Again this goes back to the change management piece. Procurement people are required to be so much more than buyers these days.
I see more changes afoot. There is trend currently for procurement function de-centralisation, which may become even more appropriate depending on what happens following Brexit. There also appears to be a growing trend to absorb procurement into the supply chain function, something I understand to an extent as it makes complete sense to for procurement to work very closely with supply chain to ensure a TCO solution, however I am seeing some businesses disbanding their procurement functions entirely in favour of an end to end supply chain solution where procurement forms part of a supply chain role. This is I am more sceptical about…
So what is the solution? Keen to hear from procurement and non-procurement professionals alike on your views and how you see procurement developing moving forward.
In the meantime, please feel free to view more of my blogs at www.jps-supplychain.co.uk/blog
Supply Chain Operations
8 年Procurement is too often silo based and as you suggest many companies do not understand that leaving requirements to the last minute is costly or as i have seen still in too many companies for sales to be given control over forecasting. You are correct procurement isnt transactional and i am surprised at the amount of companies who still do not understand 'total cost' in procurement. Too many companies also still have the 'them and us ' attitude in relations between sales and procurement. Too many sales people reluctant to understand real pricing issues in very competitive markets ...and too many procurement people concentrating on silo KPI's handed down from Finance. To me 'change management' is irrelevent if it doesnt produce results and is just 'fashionable'. The change in procurement that is needed is to bring it into an end to end supply chain function and for companies to understand the power of an effective supply chain strategy linked to strategic goals and standing squarely alongside and in the same team as sales. Supply chain can be and should be a powerful customer retention agent... supply chain needs leaders who understand sales and customer requirements and supply chain managers who can be very effective account managers and see opportunities for new business in their dealings with customers. There needs to be a massive reboot and for companies to see that customer retention strategies propelled through linking sales effectively with a 'right first time' supply chain ethos with the customer at the heart of a lean, cost effective, 'total cost' driven supply chain working through and with cross functional internal customers ...will pay huge EBITA dividends
Jennifer, considering that this post is your own creation after a deep diving analysis on whether Procurement is facing an identity crises – hat’s off and a great job !
Queen of Opportunity! Business Concierge > Making the Connections you’ve always wanted and needed!
8 年Hi Jennifer, Thanks for writing this article. Even though the profession of Procurement and Supply Chain Management have been around for a very long time now, it is very rare to find anyone that really "Get's it" The understanding of the skill set that a seasoned professional will have, is very narrow. Employers are really doing themselves a disservice by thinking that a "Purchaser" only processes a purchase order and the employer places a very low value on this as they see it as a simply administrative paper work processing function. When in reality, a seasoned Procurement Professional forms relationships with suppliers, logistics companies, customs brokers, etc. A Procurement Professional will have the education to negotiate legally binding contracts with suppliers and service companies. A Procurement Professional will have intimate knowledge of your business and what the priority of requirements are for your business. Such as in the Restaurant business, requirement to source locally, sustainably, "must be delivered to the restaurant within 1 day of picking" etc. Or Manufacturing shut downs requirement of having new machinery delivered within a 24 hour period of it being installed, as there would be no space available on site to store it. A Procurement Professional will have the knowledge to work with other work groups within a business to ensure that the actual needs are being met versus historical needs or assumptions that are being made. There is so much more to being a Supply Chain Management Professional. Value exemplified! I personally have a record of providing a minimum ROI of 3 times my fee or salary and as much as 8 times. This is powerful!
Volvo Brand Specialist at AWIN Group of Dealerships
8 年As a salesperson here is my perspective Collaborative = long sales cycle, larger investment of time and resources seeking a return, larger wins long term. Collaborative purchasing is usually centralized and relationships are almost entirely 'long distance' Transactional = shorter sales cycle, smaller wins, more likely to be local but definitely not always Both have their place. Personally, I'm more of the long term relationship vs picking up a girl in a bar type of person.
deugro (Canada) Inc. | Business Development Manager for CANADA
8 年Great post Jennifer Swain! Same challenges here in Canada! Thank you for sharing this Morvan Kerneis! As businesses look aboard to outsource and supply chains become more complex, a hand shake and a smile no longer works when buying widgets or services from your local supplier. Add to this stakeholder targets and poor staff training and it's a recipe for disaster for many!