Procurement, the game is changing

Dan explores how procurement needs to change to adapt to a new business environment.

Procurement has evolved over many years, from the early transactional roles through to the more strategic procurement functions that we see today in many organisations. Through our work supporting procurement organisational change around the world we are seeing a need to shift the thinking in the way procurement is operating so that it becomes more central to organisational strategy.

The world is changing fast. Businesses need to be more agile to take advantage of global opportunities whilst also being more sensitive to the impact of local procurement; they need to deliver cost savings whilst managing risk; they need to drive change whilst maintaining stability. It’s not easy to balance these competing forces, but it is essential that procurement changes become a driver of change across the business.

To meet these challenges, procurement needs to change. As the serial entrepreneur Richard Branson has proven time after time – “Every success story is a tale of constant adaption, revision and change.” To do this, we see five key themes that leading organisations are starting to embrace, these are highlighted below and explored further in this series.

In the past, some procurement teams have developed a reputation as ‘hard-nosed’ negotiators – sometimes the ‘bad-cop’ who will put the supplier under pressure to give more than they want. Whilst of course there is always the need for buyers to stand up for themselves, for strategic suppliers we see the need to collaborate with our supply base. In many industries (for example transport, retail) our suppliers are often the same suppliers that our competitors use. Our job then becomes to get more out of our critical resources – our supply chain – than our competitors do. We then start seeing our counterparts as the competition rather than our suppliers. This is a fundamental mind-set change and is core to the role of next generation of procurement functions.

To meet the demands of the future, our procurement teams need to change. In some organisations, procurement has developed into a function that is a blocker, not an enabler of change. To support organisational agility, we need our procurement teams to be agile. This means moving away from rules-based roles and moving more to a broader commercial role, incorporating contract management and supply chain management. In some organisations, this will mean an increased alignment to the business such that procurement is seen as embedded rather than separate governance roles.

For some, this will be a challenging transition, but in our view an essential one if procurement teams are going to take the next step. The skill set of the future will therefore be more focused on commercial skills and the ‘softer’ skills of influencing and negotiation to engage better with the business.

Procurement processes have become overly complex and confusing and as such many procurement functions have lost the support of business unit stakeholders. Fortunately, there are many technology solutions out there which are supporting the goal of simplifying procurement, to make it easier for stakeholders to comply with processes rather than finding ways around the policy. As these solutions take hold, we are seeing the importance of change management to work across the business to ensure that all stakeholders requirements are met, and that technology is used to help rather than hinder.

Procurement teams have always realised that understanding spend is key – in fact it is hard to be strategic about procurement without a good idea of what you spend but spend data is just one piece of the jigsaw. We are seeing leading organisations really leveraging internal data and linking other available data sources to provide insightful dashboards and powerful forecasting. What if you could get early warning of supply chain risks? What if you could predict the changes in demand due to changes in weather patterns? The Procurement Data Revolution is coming and if harnessed, provides an amazing opportunity for all businesses.

Can procurement change the world? Its sounds ambitious, but maybe it can. CEO’s and CFO’s of the future will have increased responsibility not only for their suppliers but their supplier’s suppliers. This is a sobering thought – but it also gives a great opportunity to change entire supply chains through the actions and policies of the ultimate buyer. Companies that can demonstrate environmentally sound supply chains and are using procurement to enable social good will be increasingly seen as game changers in their industries.

The procurement game is changing… the challenge for all organisations is to take advantage of the opportunities it offers and adapt. Richard Branson has a point about the need to adapt and has proven it many times – now it’s procurement’s turn.