Transport and logistics used to be viewed as a dedicated function, with procurement seen as adding little value other than the annual price negotiation with transport companies, or the three year review of the warehousing deal.
Useful, but deeper cost reduction or value creation from the wider supply chain was often seen as a business function role and not one the procurement team could significantly impact.
Now supply chains have become increasingly more complex. Making products at a fixed point, delivering to a warehouse and subsequent shipping to a designated location have long been superseded, with a much higher priority placed on supply chain organisation.
This is driven in part by the offshoring of manufacturing, shortened product lifecycles and the need to keep inventory to a minimum. Couple this with changing customer demand, the need for availability and increasing end delivery complexity, and cost management has become significantly more complex. This requires companies to drive innovation in inbound product flows and customer deliveries that support both cost and top line revenue generation. Challenges that have landed on the logistics industry and its suppliers to enable.
It’s this challenging and changing environment that has led to supply chain functions within organisations to up their game and become increasingly integrated across planning, manufacturing, marketing and sales. No longer seen as the distribution guys or the warehouse function, now proactivity with suppliers is needed to enable change, while still maintaining or lowering costs.
This is where procurement plays an effective and value-adding role. Working closely with supply chain teams, procurement can be the enabling link to the supply base. As a category of spend, supply chain activities often ranks second in indirect services behind marketing with 90 per cent of spend in this area with third party suppliers. The challenge is finding competencies in procurement linked to a much deeper category understanding of the cost levers within increasingly complex supply chains.
From this a new breed of procurement professional has arisen. One where becoming more integrated with supply chain teams and extending reach across many of the cost levers drives optimisation. These experts are working more strategically across the supply base to not only lower cost, but enable businesses to increase efficiency and create extended service offers to support the top line. They understand the need to link functions internally to create visibility and address total cost.
This new procurement professional focuses on the total life cycle from manufacturing to disposal, including asset liquidation and seeks out opportunities for the supply base to be more cost effective and innovative. Equally, they challenge and influence the structure of the supply chain by providing quality market insight and create new opportunities to improve the bottom line.
Driving strategic relationships with fewer but more able suppliers is a pre-requisite, with agility, enabling scale and innovation also key. This procurement expert is excited by driving great service and lower costs to achieve procurement excellence and win-wins, coupled with industry knowledge and their role as a significant enabler to world class supply chains. Are you one of them?
☛ Mike McCormack is a director and new head of the logistics practice at procurement services company 4C Associates