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Responsible procurement: the four key priorities in the PASA theme for the 2024 events season

Priorities 2024

PASA’s chief content creator Jonathan Dutton discusses the four key priorities that will inform PASA events this year, including building supply chain resilience, mitigating inflation, progressing ESG beyond tokenism and determining the role of artificial intelligence in procurement’s world.

The Seven Rights

Assurance of supply is the first responsibility of the procurement process. Not price reduction, the best terms or full compliance.

Not even other policy goals, such as environmental/ethical, social and governance (ESG) requirements or diversity, equality and inclusion (DEI) factors.

In fact, the best definition of ‘responsible procurement’ is perhaps the traditional procurement maxim of the five rights — which was amended to include the seven rights in more recent times.

This states that procurement’s role is to deliver the right goods of the right quality and quantity to the right place at the right time at the right price — and now also from the right source and purchased in the right way. 

In other words, making the “right” decision.

Yet, in our modern VUCA world of volatility, uncertainty, complexity and ambiguity, assured delivery is rarely straightforward. 

COVID taught us that supply lines are fragile and shortages increasingly common (think toilet rolls). Moreover, our modern world also teaches us that it is rare to achieve all of one’s objectives in any given project; more often, in the real-world, delicate balances are at play.

Balancing trade-offs

This raises the dilemma of trade-offs.

How do we balance multiple priorities, or even our basic seven rights, when some may be mutually exclusive? 

Or, at the very least, when it’s difficult to attain all of them. And especially when the demands of the “right source” are broadening enormously as the ESG agenda spreads ever wider – how can we fit that in as well?

Increasingly, procurement has a role in helping to decipher and apply these priorities to the supply side. A task that demands the professional confidence to drive an honest dialogue with stakeholders — for few of us can attempt to do everything. 

Resources are limited for all of us and scarce for many.

What is top priority? Which do we tackle first, second and then third? Which has to wait?

Responsible procurement today: the four S’s

Today, ‘responsible procurement’ is an approach that must include reconciling multiple competing priorities and managing any trade-offs in a transparent and defensible way — especially as the breadth of objectives to be achieved from your spend portfolio grows by the day, particularly in the ESG field.

Currently, most contemporary procurement functions are judged objectively and subjectively on achieving the four S’s:

  1. ‘Serve the factory’ — immediate support of the operational customer service business
  2. Support the corporate agenda — short-term achievements against commercial and policy goals
  3. Satisfy stakeholders — medium-term attainment of annual or quarterly aims
  4. Save the planet — longer-term advancements, perhaps on Net Zero, modern slavery, etc.

More pragmatically, a key role for the procurement function is to facilitate purchase decision-making around how to reconcile these priorities, not at the level of a single transaction (as in the five or the seven rights) but across a whole spend portfolio at a procurement manager level or a departmental level.

Can we balance priorities across a broader spectrum for greater effect?

There are maybe five key choices to decide upon:

  1. What are the priorities to be achieved across our whole spend portfolio?
  2. What is the relative importance of each priority?
  3. What targets are appropriate for each of the priorities?
  4. Which parts of the spend portfolio are most appropriate for the realisation of each target?
  5. How can we reconcile mutually exclusive priorities?

ESG demands

During 2023, one leading CPO exclaimed during a PASA CPO Roundtable, “we are just overwhelmed with ESG demands.” 

Indeed, the rise and rise of ESG considerations across the business world has had a dramatic influence on procurement decision-making, as research bears out, particularly since COVID.

The COVID period surely accelerated ESG demands on the supply side. 

The mandatory became more demanding (modern slavery and payment times reporting), the ‘required’ became more obvious (Net Zero traction, indigenous procurement targets and gender equality) and even ‘discretionary’ topics advanced significantly (supplier diversity, social procurement drives, buy local constraints, small business support), as did internal standards (policy compliance and procurement process).

ESG demands are real, but RESPONSIBLE PROCUREMENT is not just about ESG. 

It is increasingly about balancing stakeholder needs against corporate needs, and these include your organisational mission, brand values, business strategy and corporate goals, including ESG aims — in other words, your organisation’s overall priorities.

Yet all organisations are different, and have different priorities and balances to achieve.

The four key priorities we will likely all share during 2024 include ESG, but others too:

  1. Building supply chain resilience — how robust are your supply chains? How will your supply chains cope with the next ‘black swan’ event? Do you have supply chain visibility of your (first tier) supplier’s supplier? What about their suppliers? What might this mean for dealing with smaller and/or less mature suppliers? Or as a small buyer in ANZ ultimately buying from a large Chinese conglomerate?
  2. Mitigating inflation — inflation is higher in Australia than most other developed countries and is unlikely to recede to the RBA target in Australia during 2024. How can the procurement process ensure that TOTAL COST balances with RISK OF SUPPLY? Or, more practically, input pricing aligns with budgets? And what if achieving the ‘right price’ means sourcing from countries with questionable human rights or environmental standards?
  3. Progressing ESG beyond tokenism — many organisations have policy frameworks on ESG priorities and can point to some ‘showcase’ projects. But are ESG priorities hardwired into the spend portfolio and how are the trade-offs made? For example, is there a written down and agreed strategy to achieve net zero targets, including Scope 3 supply chain generated emissions (often between 90-99% of the net zero target)? Also, maybe, how are you eradicating modern slavery up your supply chain? Or driving diversity and equality amongst suppliers?
  4. Determining the role of artificial intelligence (AI) in procurement’s world — which AI solutions are you trialling? If end users can use ChatGPT to create an RFP (and they can, as suppliers are writing proposals with it) what is the role of full-time professional procurement practitioners? Where is the true potential for AI? The procurement balance? How best should we be using it, now and in future?

PASA provides practical support

These themes will inform all of our PASA events during 2024, either directly or indirectly, and ensure we support practitioners in Australia and New Zealand. 

Not only by sharing awareness of current procurement issues but exploring potential solutions. 

We aim to go beyond “admiring the problem” and offer practical ideas and methodologies to help practitioners do a better job.

View the PASA 2024 conference and events schedule here.

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