Clear direction needed for procurement’s future

21 June 2010
Last week SM reported AXA CPO Heinz Schaeffer’s view that procurement would become a centre for “spend intelligence” but was hindered by a lack of suitable talent. While I share this view in part, there are several key points that need to be addressed by CPOs everywhere if procurement is to reach its full potential. 1. There does not appear to be a clear view within the profession as to where it is heading. A consensus of the target or “end game” for procurement, followed by plans to support its achievement, will help address the talent problem at both the recruitment and professional development level. 2. Procurement leaders need to review the criteria for recruiting talent. My own view is that many companies have been guilty of following a process geared to recruiting corporate clones who are highly skilled in numeracy and verbal reasoning but lack creative or innovation skills. Anyone who has attained a HND in business studies or higher and successfully completed their CIPS diploma is suitably equipped with analytical and reasoning skills to cope with the challenges of procurement. So testing further in these areas adds little value. Instead, the recruitment process should identify – and value more highly – business acumen and entrepreneurial skills, which are the skills that will drive procurement forward over the next 10 years. 3. While the upside of the recent recession has been that it has helped raise procurement’s profile, the downside has been a narrow focus on cost savings that could trap purchasing in a tactical role and prevent it from progressing. If Heinz Schaeffer’s view is correct – and I believe it largely is – procurement professionals will need to develop much broader commercial skills and business acumen to become “procurement entrepreneurs”. These entrepreneurs will need to become integral with sales and manage whole markets, not just categories. This requires much greater collaboration and innovation, combined with agility to capture opportunities and manage risk more effectively. Procurement’s focus then becomes much broader, concentrating on the “procurement golden triangle” of growth and margin improvement and doing it sustainably. The ability to capture opportunities and manage risk in uncertain markets requires procurement to be much closer to the end customer, in order to create supply chains capable of responding to unpredictable demand. In such an environment, agility is key. This means building “sensing and responding” capabilities that build the market intelligence Schaeffer refers to. When linked to key business processes, the benefit of this intelligence is to identify opportunities and risk and to respond to them more quickly and effectively than competitors. It is this ability to maximise the capture of opportunities and manage risk that lies at the core of procurement’s future potential. Once this capability is achieved and embedded in organisations, any lingering doubt regarding procurement’s role as a core business competency will be gone forever.
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