Procurement – Is it a Force for Good?

One of the characteristics of 21st Century procurement is status anxiety. Barely a week goes by without another article or blog bemoaning stakeholders who don’t appreciate the strategic contribution professional buyers make to the organisation. Admittedly I’ve been around the profession for while – starting out as a buyer for Black and Decker in the mid-80s, through to Procurement Director at Rolls Royce and, following those practitioner years, consulting and training procurement types for around fifteen years now. Some of the arguments for procurement recognition have been around the block many times over these years.

During this time, we’ve also seen significant growth (and indeed influence) of procurement’s presence in ‘non-traditional’ businesses – procurement had become well established in manufacturing sectors (particularly in automotive, aerospace, white goods, and of course FMCG) but good practice is now pretty mainstream in pharma, financial services, the public sector, and many others. I often suggest that procurement is around ten years behind marketing in its development and acceptance as a mainstream business function, and as it’s now unheard of to find a business without a strong marketing presence, procurement is certainly heading in the same direction.

The procurement role used to be straightforward – source products and services, be competent in negotiation (and maybe contracting), and deliver cost savings to your employer. The result is that many goods are now, pound for pound, better value for money than they have ever been – just think about the functionality available to buyers of motor vehicles and mobile phones versus the cost of acquisition these days. Procurement’s sophisticated management of supply chains and key supplier relationships has been a major factor alongside technological innovation in making this happen.

The 2008 financial crisis brought risk management to the forefront of many a procurement agenda. Rather obviously, it’s no good boasting about forecasted cost savings if your supplier was about to go out of business. So, category managers now had another KPI to be concerned with, alongside savings, quality and delivery. And why not? These things matter, and if procurement wasn’t to lead the risk conversation with suppliers, then who would?

One of procurement’s challenges to reaching the top is the rather jaundiced opinion of stakeholders to the role of the buyer or category manager. “It’s all about price reduction, innit”, say cynical colleagues who dismiss (often from a place of ignorance) the sophisticated skills and toolkit required to optimise value from the supply chain. Nevertheless, procurement professionals plough on in servicing the needs of those stakeholders as well as they can, whilst hoping that ‘one day’ those departmental efforts will lead to recognition as a strategic function.

Returning to the core role of procurement (at least traditionally) of securing competitive prices, quality-compliant supplies, delivered on-time-in-full, it can be argued that the ‘good’ that procurement was (and still is) providing was in aiding business growth (more cost-competitive supply inputs lead to better value outputs), and supporting business in satisfying customers and clients, all of which enable the organisation to meet the needs of investors or policymakers. At its heart, procurement’s value proposition is unambiguous – better-managed supply inputs have a direct impact on the bottom-line. I would wager that most stakeholders see procurement’s role in these terms, and despite a lack of enthusiasm for procurement’s boardroom status ambitions, respect is offered for the important role the function plays in supporting business success.

But things have changed in recent years. We now see procurement responding not only to the business goals, but to wider political campaigns from outside the organisation. We now have procurement practitioners working to improve diversity in the supply chain, the environment, ethical sourcing, or working to eradicate slavery, child exploitation, corruption, amongst other campaigns. Each of these has merit as issues that require improvement for the good of the planet and human rights, and procurement has a role to play in this. And whilst these worthy campaigns require action, I do fear that there is a risk that they distract procurement professionals from their core activities, and questions should be asked about the impact of all this attention on the organisation.

In all this, we must never forget that there can be a significant business impact. In recent years, there have been several catastrophes and supply chain failures that have seriously damaged corporate reputations, costing businesses billions of dollars in fines and lost revenues. Procurement’s approach to risk management is designed to address these issues and mitigate their recurrence, and it is necessary work, although it must be said that risk management is the work of the whole organisation, and not something delegates to a single function. But whilst protecting the reputation of the corporation is vital, and other social issues important, how much bandwidth is this taking from the core activity of procurement? And are we developing young professionals to be competent in those core activities, or facilitating the distraction of people towards issues that are more political than business-oriented, and a constant feature of their social media streams?

It’s routinely reported that millennials are hyper-aware of their social status (undoubtedly exacerbated by social media) and are often keen to campaign on issues of social importance, and this thinking has taken a grip on the procurement profession. In my judgement, it is time for leaders to reflect on whether this is serving the needs of stakeholders and the organisation. Diluting the effort and focus on procurement delivering value to the organisation presents a risk of the function becoming less impactful, and irrelevant to those stakeholders who simply see procurement and the supply chain as helpers in making own functions deliver on their own commitments.

Do I believe that procurement can be a force for good? Certainly, it can, but I’m sceptical of whether the function can cover so many bases and still deliver on its core purpose. And it is delivering on its core purpose that will elevate procurement in the eyes of leaders and stakeholders.

Later today, I’ll be attending Spend Matters’ debate on whether the function can be a force for good. Like all good debates, there’ll be strong and legitimate arguments on both sides. What I’m expecting both will agree on is that we all want procurement to be recognised for the strategic contribution it can make to business success. In an era of mass participation in the political discourse, savvy campaign marketing, and virtue signalling, in the end the procurement winners of the future might just be the ones that focus on maximising their competence and delivering for their employers. Diligently, quietly, professionally, and outside the glare of social media.

 

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