Redefining Procurement

Procurement Defined!

Procurement has been defined traditionally as "the acquisition of goods or services is now concerned with the ‘Total Cost Of Acquisition’ not just the purchase price, Procurement incorporates a more strategic approach to the acquisition of goods and services and tends to be more system and process driven". However CIPS (Chartered Institute for Procurement and Supply) has defined it as "Procurement is the business management function that ensures identification, sourcing, access and management of the external resources that an organization needs or may need to fulfil its strategic objectives". The question is "Does the Procurement Practitioners understand and implement such definitions?" I will highlight this and focus more on the core meaning of Procurement and what makes it strategic as it should be. Someone may argue that what will be covered in the following lines can't be generalized! I totally agree, however it can be more applicable on many organizations in the MENA region and other areas that procurement are not yet matured or still evolving.

Are We Strategic?

It should be clear for all of us that there is difference between what usually said during the summits, conferences and forum as well as what written in the books, blogs and articles and what are really existing on the ground. It should be also clear that we as Procurement Professional do our best level to advocate and market ourselves through such event as Strategic Partners and Strategic Function in the Business, however, others may not have the same impression. To be really strategic, it is very important that Business Leaders see you so and put you in such position.

Are we Considered?

What I want to say is that; having Procurement as Strategic Function is a Business Call and not only a believe that we as Procurement Practitioners have. Why I am saying so? Because strategic actions need empowerment and authorization that should be cascaded by the top management. If the Top Management (the C suits) see Procurement as Supportive and Backoffice Function and a Pure Cost Center, then whatever you do, you will be only evaluated on how much reductions you bring on the purchase price and by how many headcount you should have to manage the buying activities. If the business are involving in finalization of any partnership agreement with your absence, then you have to know that Procurement in your organization is no more than a buying entity and a transactional function. If the business set its strategies and study its challenges and opportunities without you being on the table, then you are for them only a buyer! If the business don't have CPO and all other functions have VPs and Cs, then Procurement are never strategic is such business. Let's be pragmatic and accept the facts!

Why this Happen?

Unfortunately, procurement practitioners in general has little marketing skills if not at all. We don't market ourselves within our organizations; if we did a very good and remarkable job, we don't report it probably to the management and business leaders! If we make some savings we find it difficult to materialize it and show the management how it hits the bottom-line. We are always Reactive and not Proactive! We are always been blamed for any delay within the supply chain no matter what we did or what milestones we achieved! When something bad happen to the market or business we are the first function to be targeted to reduce the headcount! We should ask ourselves why this happen, why Procurement Practitioner are unable to proof themselves and the importance of their function?

I can simply say it is because most of us become Procurement Practitioner by Chance and not by Choice! Although we will start having passion of what we start doing and feel the excitement and enjoyment after each successful deal we close or amount of money we saved, however, still many of us don't invest in themselves to have the right skills and calipers that others at other functions may have. And if we go through training or qualification, less people will put what they learn into implementation and they will simply defend themselves that the company policies and environment didn't keep a space for implementing anything new!

What Actions Should Be Taken?

First of all we should change our mindset from being buyers to being strategic partners. Secondly, we need to reinvent our policies and procedures and introduce the Value For Money concept and considering the Product Life Cycle and not only the Purchase Price. We should define an evaluation criteria that consider all the factors reflecting the Total Cost of Acquisition Concept. Thirdly, we should manage the relations with our vendors and service providers and start build business partnerships with the core vendors/service providers and start calling them as "Business Partners". Having the right business partner will make difference in the achievements of the whole business strategic goals and having the competitive advantage in your industry. Fourthly, introducing new approaches and technologies that helps business to be more competitive and add value to the business bottom line. Fifthly, brining new business partners that are pioneers in their business and new comers to the particular market serving your industry. New ways can bring new innovations!

What Procurement Should be?

Procurement Should be more about building partnerships and alliances that will help the business to achieve its strategic goals. We should not keep concentrating only on cost saving which would be a default result if we have the right business partners that bring to us the new ideas and right approaches to do things in most efficient and effective way as well as bringing new innovations that can only be exclusive to our business, which in return will helps in shaping a big competitive advantage amongst its rivals. For more insights you can refer to my previous article Don't Consider Your Procurement Function as Cost or Over-Head.

We should put more efforts to come out with business case studies that will make it crystal clear to the business leaders the adding value resulted from such approach.

I was covering the benefits and adding value resulted from such approach in separate article The Shift from Savings-Driven to Value-Driven Procurement. Where you will find out that there are many ways procurement can optimize the cost from building strategic partnerships rather than just concentrating on negotiating the purchase price. In addition to other adding value that will make the business more profitable!

Please share your comments and feedback on how much you agree or disagree on the above!