18 October 2001
Purchasers hold many of the keys to corporate success in the age of globalisation, noted speakers at this month's CIPS annual conference. But, writes David Arminas, new opportunity means greater responsibility
Britain is not - nor is it likely to be - in a recession. In fact, the UK is in pretty good shape compared to other countries, Mark Berrisford-Smith, senior economist with HSBC Bank, said in his presentation to the CIPS annual conference in London earlier this month.
Despite the terrible events and aftermath of 11 September, consumer confidence will remain high and increased government spending will take up the slack as corporate UK retrenches for the short term. By the middle of 2002, it should be business as usual.
However, there can be little doubt that the winds of change are blowing, as seen during last summer's G8 summit in Genoa where anti-globalisation protesters stole the show. The pressure on businesses to adhere to more socially acceptable behaviour is increasing, not only from fringe groups, but from mainstream shareholders as well.
Globalisation is a call in itself for purchasers to acquire new skills to plan and manage the total value chain, as Tom McGuffog, visiting professor at the University of Glasgow and former director at Nestlé, pointed out in his presentation. As never before, purchasers must carefully link customers and suppliers, as well as third-party agents such as banks, insurance companies and logistics, into an international supply chain. Sticking to global standards is essential.
Supply chains now circle the globe and purchasers must be able to communicate effectively with different cultures. Rapid communication means problems can both arise and be solved more quickly, so procurement professionals must have the skills to react within shorter timescales.
In many ways, purchasers should be best placed to see what dangers lie ahead in key areas that affect overall corporate performance. This raises procurement out of its functional silo and up to the level of business leader, where it must take note of these winds of change.
Increased knowledge underpins most of the intangible resources that nowadays account for the value of a company, according to Richard Hall, professor at the University of Durham Business School.Weak point
Yet the information benefit is also the Achilles heel of the new economy. Keepers of this knowledge carry a heavy responsibility, said Richard Russill, the opening speaker.
Corporate leaders, including purchasers, recognise that increased access to information means fewer reasons for not knowing what your supply chain is up to. Social responsibility is becoming easier to assess.
Russill, director of consultancy Innovative Concepts, suggested that procurement is a window on the culture of a company. "The deals a company strikes are increasingly being used to decide whether or not they are behaving responsibly," he told delegates.
However, facts alone may not be enough as the basis for decisions. It is wrong to believe that because there is no evidence to back up what some experts or pressure groups are saying, a company has a licence to continue as before until it is shown proof of transgressions.
There is, according to Russill, an increasing need for instincts - based on a deeply held set of beliefs about what is right and wrong - to be taken into account when taking decisions normally made purely on facts.
This call for change is an opportunity for purchasers. "Be prepared to learn from those whose practices are ahead of yours. This is a beneficial way of spreading the vast influence you have over your external resources," argued Russill.
Coupled with traditional ways of measuring return on investment, this becomes renewable return on investment (RROI) - the acceptable face of capitalism in today's globalisation. As one delegate from a large UK international manufacturer commented, there is nothing new in the call for RROI. Purchasers should already be weaving it into their strategic performance.
Even so, the question remains as to how many procurement professionals will answer the call.