Why We Should Love Procurement

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Last month, my colleague Bram Weerts declared the procurement function at risk of extinction.

But all is not lost! I see some very powerful paths Procurement can take to become a more appreciated and valuable business function in enterprises.

Procurement is suffering from a reputation problem 

Many executives express their frustration with procurement frequently claim, “they just don’t understand what I need, and obstruct me from achieving my goals”. Procurement is often seen as that last hurdle before reaching the finish line like a police officer trying to find holes in your story, looking to give you a slap on the wrist if they can. Everyone tries to circumvent Procurement when they need to buy products or services.

 

The underlying issue often lies in the emphasis on the transactional side of procurement in enterprises. People are subjected to procurement  processes and form-filling that are very time-consuming, valueless and inefficient, feeling like they’re being sent from one desk to the other. 

Of course, there is a role for Procurement. Of course an enterprise needs to have expertise and capability in contracting, buying and using services from third parties. And of course rogue spending is an issue for enterprises. But it’s time to take the next step. If being restrictive didn’t bring you the seat at the table you envisioned, if ‘the business’ still doesn’t ‘get’ you and doesn’t take you serious, its time to change the tune. But how?

Guides of the As-a-Service Journey

I want to argue Procurement is in a unique position to reinvent itself and that we should love Procurement. 

HfS sees a dramatic shift in services towards the As-a-Service Economy. Key characteristics of the As-a-Service Economy are:

  • More and deeper collaboration between suppliers and buyers
  • A focus on business outcomes
  • Usage of digital platforms, analytics and automation to facilitate the convergence of people, technology and process
  • Services that are multi-client, leverage new opportunities for efficiency and quality and focus on the customers’ customers.

Procurement can be the enabler of the As-a-Service Journey. Don’t look further…. Procurement should be the broker of capability.  Haven’t you noticed how “IT Services” and “BPO” and “software” have become procurement categories in so many buyers today?  As services and technology become increasingly commoditized, standardized and commonplace, the greater the opportunity for Procurement to take the lead in adding value beyond merely negotiating price points.

The future of the supplier-buyer relationship is collaborative engagement and that starts in the contracting phase. Procurement should have a clear vision on the way the enterprise wants to form relationships with suppliers, what the nature of the collaboration should look like and how contracts facilitate collaborative engagements. 

Procurement Brokers of Capability

The key to becoming a broker of capability is to be the spider in the web. In my years as a consultant, I often didn’t have a formal team. I went out into the organisation, identified the people and capabilities I needed to tackle the problem, formed informal teams of the right people and made it happen with them. I was a fixer more than anything, understanding the problem, limitations, possibilities and I knew the right people and brought them together. Not always easy, but a lot of fun. This is how I envision the future of the procurement professional. Identify business needs (you do this by actually talking to these people, understanding what they have to achieve), dive into your network and get the capabilities together that are needed. If you take a partnership approach, look at relationships long-term rather than short-term transactions, people are willing to do a lot for you. 

So what is needed to truly become Brokers of Capability?

  • Be a business function, not a finance function – Procurement should be immersed in business units to understand the business, understand the needs, understand the market. Business executives have to allow Procurement into their world, Bram was right to point to business executives as a source of Procurement’s woes.
  • Category Expertise – One of the hardest areas to fix for procurement is strategic sourcing and category expertise, especially in the tail of indirect spend. This requires deep expertise of the category and the market, which is a challenge for enterprises to build in-house. 
  • Information – At the heart of every buying decision lies information. Procurement has more data at its disposal than ever before. Information and insights derived from all this data is critical for the evolution of the profession. Digital platforms have emerged and are quickly growing in adoption and capability. Advanced analytics are drastically improving the insights and decision-making processes for Procurement. 
  • Relationships – Building and maintaining relationships, internally and externally, is critical for modern Procurement. Price isn’t everything and it’s definitely not a predictor for the willingness to go beyond the contract and take a relationship approach to the engagement. Time and time again in reference calls for HfS Research Blueprints and in our discussions with services buyers at HfS events, the best service providers are perceived to be the ones investing in the long-term relationship, going above and beyond expectations and contractual obligations to deliver real business value to the client. Incorporate these tenets in your sourcing practices and your enterprise will benefit. 
  • End-to-end focus – Key to realizing business outcomes and benefits of good procurement are closed loop processes and follow through after the ink on the contract is dry. Turning theoretic savings into real ones is still pretty hard to achieve.
  • Tech savvy –  Technology platforms with embedded process automation and advanced analytics are emerging at the core of Procurement. Procurement professionals need to be more tech savvy than ever before to make sure they use and leverage the available technology platforms. 

Ok, we agree it’s Procurement’s job to know what is out there, what the quality of products and services are, what going rates are and which terms are acceptable. They are the ‘go to guys’ when you as a business executive need something to achieve your goals. 

I’m not naive. I know there are still a lot of people in Procurement hiding behind procedures and forms, terrified of becoming obsolete without them, clueless what your business goals are.

The Bottom-line: It takes two to tango 

Friends in Procurement, if you don’t have a vision of Procurement being a business facilitator, now is a good time to get one. And “business”, this asks for different behaviour from you as well.

Posted in : Business Process Outsourcing (BPO), Procurement and Supply Chain

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  1. I couldn’t agree more with this, Derk.

    I feel that a two-tier procurement model is upon us… whereby the "winners" are those that focus on exactly what you referenced above, and the "losers" – those that focus on maintaining the status quo – will by outsourced and ultimately automated out of the profession.

    What will be interesting to me is to see how what we consider to be "strategic" works evolves, as technology increasingly impacts and streamlines those processes that we previously thought (or hoped) could never be done by anyone except for the highly paid and head office based strategic procurement professional.