Procurement, The Path To Oblivion

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Imagine archaeologists picking over the bones of a long dead culture, frantically trying to interpret and understand the language, behaviours and customs of it’s people. As they carefully harvest critical pieces of evidence it becomes clear that it’s people, in fits of bureaucratic bewilderment, destroyed their own shrines of worship, the tombstone once known as Procurement!

Within the Procurement Discipline (and Academics will of course likely argue that no such Discipline actually exists) there is such a current trend toward overpowering process control and a need to be involved and consulted in all business decisions, that Procurement is probably well along on the road to self-destruction.

We live in an age of disruption, where media, bandwidth, communications, and burgeoning electronic market places all make our ability to travel and collaborate the enabler of a new and far reaching paradigm for securing the supply of goods and services. Robotics, automation and the digitally driven business means that Procurement now desperately needs to reinvent itself or face extinction.

If we have driverless trucks, cars, trains and planes, is it such a difficult conclusion to reach that Driverless Procurement without the all-consuming Contract Management and Procurement control and processes is only a few moments away.  However, I can already hear my Luddite friends in Contract Management weeping and howling that the Procurement processes of old are still the processes of today!

Past Mistakes

By listening and accepting my Luddite friends advice, we are probably doomed to repeat mistakes of past eons. And of course where would we be without a meaningful quote to reference?

“You are not responsible for the past, but insofar as you do nothing, you are complicit in the present created by it.”

Johnathon Miller

The bottom line is that we need to take ownership of our future. We cannot blindly accept that the current state is also the future state. Key digital technologies and globalisation are upon us and the future will be dependent on our agility and our ability to make change now! To understand why, we first need to reflect on the vociferous movement to obstruct improvement.

The Interminable Tender Processes

The Movement is actually our own people struggling to make change. Our current Procurement and Contracting processes are tiresome, time consuming and lacking in any real imagination – from the time that end users decide there is a need and requirement, through to final award of a Contract and implementation of a new relationship. These embedded and rigid processes can take between three to twelve months.

The situation is amplified by the fact that, 200 metres down the road, another luddite is duplicating the effort in the same market place, under the mistaken impression that competition means keeping everything in house behind closed doors. Strangely enough this situation is repeated day in, day out in the same markets by many luddites all repeating the same effort at the same time.

In the age of disruption and expanded competition based on our ability to move quickly, who can afford to be constrained by an antique Procurement function that is still living in the 1940s?

We need to get rid of fanatical Procurement bureaucrats who somehow create unseen meanings in every word and comma, punctuated by highly likely risks of doom and catastrophic failure of the required contracted relationship. We need to strip down Procurement to its core and reinvent our processes and the skills and competencies that we need to operate in a new paradigm.

Creating a New World for Procurement

We should now take the view that Procurement needs to become a Strategic Supply Organisation. We need to reinvent our approach, processes and organisation to align with the digital enterprise. There will be a much smaller centric Procurement organisation that focuses on supply analytics and supply enablement as its core activities. All of the “old bits” in the middle need to be automated and integrated, not just internally, but linked externally to growing e-market places and the wider “Internet of Things”.

Sharing information, needs and requirements within vertically integrated businesses should become the norm, and suppliers will respond by making available lower cost and more efficient solutions for many customers and not just a few. The vision of the new Procurement will be delivering real business value through rapid response and upgraded supply capabilities. Value will no longer be about savings, but more about Procurement’s ability to react to vital opportunities and lock in secure supply arrangement.

Category Management and Contract Management should be fully automated. Global market analysis is the same regardless of what Company you are with and it’s the detailed analytics and decision processes that actually count. Remember there are few physical boundaries now and you are actually operating in a global environment which means that global solutions are possible if you can only imagine them. As educated Supply people we need to let go of prejudices and misguided perceptions of domestic loyalty – these behaviours cost real money!

Accessing global information quickly and responding today is significantly better than wasting months of worthless time and effort. Let’s face it, once you have made the supply decision based in real time, intelligent systems will also handle the generation of Contracts, thankfully making my erstwhile Luddite friends completely obsolete!

Supply Transformation

We don’t have time for evolution! We are standing on the cusp of a revolution where customers and suppliers need to interact with supply managers in a dynamic digital world. Increased collaboration in the supply chain means that our Procurement Teams will become smaller and we need to:

1.      Become technology champions and engage the possible analytics;

2.      Build strong customer and supplier networks, ensuring supply requirements are neatly integrated with our customer demands – delivering solutions either just as our customers need them, or one minute before they actually know they need them!

3.      Become a valued part of the business and not an unwelcome constraint on our operations; and

4.      Embrace innovation and entrepreneurship as a core value, delivering new opportunities, goods and services.

While ethics and probity will still have a place in supply activities, our competition laws will also need to be reviewed to take into account virtual market places, the increasing effect of media and disruption. Competition will no longer be about pricing, it will be all about speed to market and our ability to react faster than our competitors.

Conclusions

The Luddites are gone, long live the age of Supply revolution! It’s time to stand up and be counted – We need to stop teaching traditional Procurement drivel at Universities. Chief Supply Officers must collectively develop the new discipline and make the necessary structural and cultural change in our discipline. Technology has already replaced Category and Contract Managers while supply systems integrated with customers and suppliers now provide us with outstanding supply analytics. We should be embracing Solutions as a Service (SaaS) with virtual global market places abounding with opportunities.  At the transactional level, processes are all but fully automated with little or no manual intervention necessary from sluggish purchasing people.

Finally, Chief Supply Officers now need to create a movement for change. Strategic supply foresight supported by technology will become the norm as more and more innovative and radical changes are made in Supply teams. This approach can only be successful by Supply working more closely with the Business and reacting to their needs today. Let’s build more robust analytics and supply options and take control of our own destinies, let’s build the Future!

  • Are you looking to learn and network with your peers? PASA CPO Summit, ‘Future Proofing You’, will be held on 13 & 14th March 2018 in Sydney. 

 

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