Strategic sourcing not the answer to procurement transformation

19 April 2013

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19 April 2013 | Paul Snell

Procurement cannot be transformed by implementing global strategic sourcing.

This was the view put forward by Paul Alexander, director, indirect procurement at BP at the ProcureCon Indirect conference in London this week.

Acknowledging this was a “contrarian” opinion, Alexander told delegates there were three reasons why attempting this was “probably impossible”.

He said there are truly very few global supply markets, particularly when it comes to indirect procurement. The second reason was that most sourcing is not strategic. “Most of the buying we do is no more than basic purchasing. We need to drive good deals, we need good outcomes, and it is important to the bottom line – but it’s not strategic,” he said. And third, he explained transformation is a difficult process with many elements, so strategic sourcing alone is unlikely to work on its own as a driver.

He argued: “If you are trying to transform procurement, transformation can only be relevant and meaningful if you transform in a way that is meaningful to your business. There is no point talking about transformation if it is just about your itsy-bitsy procurement department.”

But instead he advocated: “Let’s stop talking about strategic sourcing, and let’s talk about better buying. I think the essence of transformation is to give the business what it really needs, to listen very, very hard. It might be better deals, it might be good data, other things, but the important thing is to listen hard and not assume you know what the business wants.”

While considering the role of indirect procurement at BP, Alexander said the team had come up with three core areas to focus on, all underpinned by good spend data. These were:

       Making it easier to buy. “It is not the role of procurement, in my view to stop the business spending money,” he said, pointing to the ease of use of online retailer Amazon as an example indirect procurement could follow.

       Investing in people. “In indirect procurement money can be spent in other ways by people who have nothing to do the procurement organisation. Good people are the best way to make ourselves relevant,” he said.

       Excelling at negotiation and sourcing. “We’ve learnt to drop those procurement acronyms and terminology, because it means nothing to the business,” he added.

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