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Procurement’s Evolving Role in Enterprise Supply Chains

This paper is only one contribution to the ongoing debate about procurement’s evolution as a subject along a supply chain that now fulfils the marketing concept – from conception to consumption.

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The whole area of supply-side sourcing is coming back into focus once again as the world reels from the financial services melt-down and its impact on the real economy. Since the turn of the New Millennium, multi-national corporations in particular have been pursuing global sourcing strategies in the relentless search for lower cost inputs to manufacturing. This in turn has had the effect of “…making supply chains longer and more fragmented, and this is exposing firms to greater costs and risks” (Christopher, M., Jia, Fu, Khan, Omera, Mena, Carlos, Palmer, Andrew, & Sandberg, Erik (2007), Global Sourcing and Logistics, Research Report, Cranfield School of management, May 2007, p.3.). The same research also found that most firms were still largely basing their procurement decisions on a minimum price approach rather than the more sophisticated ‘Total Cost of Ownership’ (Ibid) principle. Finally, global trade appears to be significantly contributing to the emission of greenhouse gases because of the added transportation legs involved, and this flies in the face of efforts to reduce CO² emissions. Maybe we will see a change back to regional and local sourcing as a result of this new factor that is concerning the community at large.

Indeed, from our own work we see a clear trend towards a sub-segment within the overall ‘collaborative’ customer segment that appears to be very empathetic towards sustaining the natural environment and corporate social responsibility; this sub-segment will surely penalise parties along the supply chain who do not take sufficient measures to minimise their carbon footprint.

The task ahead of us is to re-connect the supply-side to the demand-side, not that it has ever been connected, and that’s part of the problem. It is hard to imagine how an enterprise can successfully procure the raw materials, parts, sub-assemblies, and the other inputs it requires for its business if there is not a live connection with the customer-facing side of the business. But that is what has been going on for generations, and sadly, continues to this day in many enterprises.

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