19 October 2000
Corporate leaders are less keen now on supplier management as a main method of improving company performance, writes David Arminas
In his speech to the annual meeting of the Society of Purchasing Officers in Local Government, in London this month, Brian Rigby, deputy chief executive of the Office of Government Commerce (OGC), gave a stern warning.
The OGC has only been going since April and already it is imperative that it make its mark in a relatively short period or face uncertainties over its future, he said. "If we don't make a big impact in the next 12 months, we might as well give up."
Hyperbole aside, Rigby's comments are particularly poignant, given the latest Bourton Group annual survey. For the first time in three years, corporate leaders have moved supplier management down the ladder of the most important methods of boosting performance.
In today's global environment, chief executives expect corporate change to happen at increasing speed. Purchasing professionals have been the focus for much of this change management, especially through the adoption of e-commerce and, in particular, e-procurement.
Worryingly, the Bourton survey showed that IT systems are seen as the top enabler. Another survey by the same company earlier this year showed that, for the first time, UK investment in IT now equals investment in more traditional plant and equipment. IT investment is expected to surpass plant investment this year, it concluded.
This is akin to seeing the messenger and not the message as the company saviour. So are procurement professionals in danger of being eclipsed by the very mechanism that was to propel them to the top of the corporate restructuring agenda - IT?
"There is a risk that if procurement professionals don't embrace the technology and make it work for them, their organisations will see them as less important than before," said Chris Webster, director of supply chain for Europe at consultancy Cap Gemini Ernst & Young.
Purchasers may not yet have lost the momentum, but there needs to be a new breed of professional, argued Webster. "They don't get their power from physically controlling the purchasing department processes, but from managing the information that comes out of it."
IT systems can give organisations a more process-orientated view of the entire business, from client to supplier, thanks to the amount of information it can extract and its accuracy, agreed Jeremy Hammant, a partner in PA Consulting Group's global e-supply chain practice. But organisations will still need people strategically to source and outsource. It will be up to the procurement directors to make functional silos a thing of the past, and this is still not happening as much as many people think, Hammant said.
Time is not necessarily running out for purchasing directors to grasp the re-engineering nettle, but that is no reason to believe there is a lot of time. Other people - manufacturing, operations and logistics directors - are just as eager to be seen as corporate re-engineers, Hammant noted.
Getting to grips with e-business is fraught with anxiety, even for the major progressive firms such as electronics giant Philips, as delegates to the CIPS annual conference heard during a question-time panel discussion.
Purchasers will be judged on how they handle these implementations. During this process, they should ensure their corporate leaders understand that any IT system can do only three things regarding business performance improvement: enable, accelerate and sustain it. A system will not make the improvements, noted Webster. Only those acting on information derived from using IT equipment can do that.
"If you turn purchasing into a technology-driven project, you will certainly get the technology but not the results," Webster said. "Changes should be throughout the organisation and not simply within procurement departments. Suppliers, too, should benefit and see the increased information as better visibility by, for example, improved payment methods."
Regardless of all the IT investment, Webster believes that too many senior managers cling to the idea of procurement as an order processing department and that improvements are measured simply by the bottom-line prices on goods.
• Copies of the survey, Brave New Work, are available from the Bourton Group on 01926 633333.