PART 2: Procurement In The Future – From Procurement To Three-Pronged Management

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Author: Ben Shute FCIPS, CEO, Comprara

PART 2 of a 4-part series running through December on the challenges facing procurement. Read part one, which looked at how automation is changing roles, here

 

Procurement of the future will not be about purchasing. It will be about the three-pronged management areas of supply, risk, and brand.

Our world is not stable. We are living in an era of increased technology disruption, added to the traditional disruptions of geopolitics and natural events. As a result of this instability, the traditional approaches of procurement are not sustainable. You should not negotiate annually with your established networks of suppliers or sources. Instead, the procurement roles of today and tomorrow should be about supply management.

Suppose for a moment that your organisation has put in place good robotic process automation. As a result, a lot of your clerical work is taken care of by the RPA. Furthermore, the RPA is designed to provide you with up-to-date data about changing markets, rapidly inform you of situations that can affect your supply chain, and more.

The obvious growth-enhancing activity you can undertake with your time and the enriched data that the RPA provides you is to both reactively and proactively manage the supply chain.

Free from mundane tasks, procurement professionals will be asked to undertake more cognitively intensive tasks, such as discovering if the organisation is making good use of opportunities for concerted action among different divisions and/or subsidiaries, or discovering or anticipating supply bottlenecks and interruptions to ensure a continuous supply, not to mention moving away from the traditional procurement goal of cost saving and toward managing total value beyond simple economics.

Total value management includes risk management, and increasingly, brand management.

Risk is ubiquitous in the world of business. The risks that need to be managed tie in directly with the top 4 concerns of CEOs:

1) rising costs,

2) emergence of new business models,

3) changes in sales patterns and

4) new competitions and disruptions.

As a result, there can be no greater growth-enhancing activity than managing risk, especially today when, according to an Accenture study involving 125 chief procurement officers, 70% believe procurement-related risks have increased. The cause of the increased risk is the instability of our current economies. But despite the increase in risk, the same Accenture study has shown that many organisations remain ill-equipped to fully cope with procurement-related risks.

Crucially, one of the shortfalls in risk management is tied to supply chain management, falling short on supplier reliability and price volatility. Also, an organisation’s overall procurement capabilities may not include taking full advantage of risk-focused tools and services, such as predictive analytics.

Finally, risk management in our new world involves building multi-faceted relationships between suppliers and procurement officers, not only based on past dealings, but also predictions about the future. Because organisations can no longer afford to react, they must proactively manage risk, and for that, a strong brand is necessary.

Traditionally, brand management is something procurement professionals have left to the marketing department or to external marketing agencies. However, an organisation’s brand is not just about selling goods and services to the client, but also about trust.

At the end of the day, marketing is about generating goodwill. Procurement officers can both help to create goodwill by providing assurances regarding the ethics and sustainability of the supply chain, and by cashing in goodwill to have clout within the supply chain.

So that, if necessary, win-win scenarios can be negotiated with suppliers to facilitate faster changes to the supply chain in response to altered conditions.

Stepping out of the procurement comfort zone to actively help build the brand of the organisation, is another value-enhancing activity that human procurement officers can perform to stay a step ahead of the robots. But to do so, procurement officers must understand concepts, such as the sustainability agenda.

 

About the author
Ben Shute FCIPS, is a thought leader and CEO of Comprara, a consulting business that has led the market in the development of capability and capacity diagnostic applications.

  • Have you heard about PASA CPO Summit in March? ‘Future Proofing You’ will be held on 13 & 14th March 2018 in Sydney. 

 

Comprara offers capability & capacity solutions for buyers:

Capability:

www.skillsgapanalsysis.com – Capability and Departmental Analysis

www.academyofprocurement.com – Capability Development

Capacity:

www.comprara.com.au – Process Excellence and Transformation

www.p-i.com.au – Spend and Performance Analysis

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