If you could re-design the procurement function what might it look like? In this short article we provide a view of what we believe the future of Procurement might become.
To begin with, we need to separate out two distinct areas that are commonly called Procurement into Procurement Process and Procurement Advisory:
This is the area where most procurement departments still reside, it captures the areas such as supplier on-boarding, sourcing, pricing, auctions, contract award/management and order placement. Within this area Procurements value resides from undertaking the processes with optimum effieciency, for example focusing on reducing the time to undertake the procurement.
As technology advances it is steadily encroaching further into automating the entire Procurement Process. People are an expensive commodity, when they can be replaced by technology it provides new opportunities for businesses. Automating Procurement Process enables a reduction in headcount, whilst providing opportunity to increase efficiencies and reduce business costs. We are already seeing predictive analytics being heralded as the next evolution in procurement technology, it is an inevitable result of technology advances that the Procurement Process will be fully automated one day.
“Procurements Real Value is not in the Process but higher up”
This is a relatively new area for many procurement professionals and one that holds the greatest potential. The objective is to look beyond the process to identify how the engagement between the buyer, the business and the supplier can achieve maximum benefit.
The engagement with the supplier is undertaken at a business level, where the underlying culture is to drive collaboration for mutual benefit.
In the advisory role the procurement professional works with the supply chain to identify mutual opportunities, encourages innovation within new and existing contracts, supports a sustainable and competitive supply chain and promotes supplier successes into the business. The objective is to become a “Customer of Choice” to secure the best suppliers and maximize business value.
The relationship with the business focuses on providing advice and guidance, enabling Procurement to be identified as a trusted business partner. The procurement advisor is a desired capability, one who the business actively engages with to ask for advice, guidance and support in achieving its aims.
The procurement advisor is a critical aspect of an organisations ongoing success, their value is maximising the business benefits for all parties to drive mutual success.
Procurement is at a crossroads, there are many calling for procurement to change but what does that actually mean? Our interpretation is that procurement needs to evolve beyond Process into a higher function, one we have called the Advisory role.
With many organisations already implementing procurement technology the question for you is:
“Are you a Process or an Advisor?”
Author: Mike Robertson CEO POD Procurement
POD Procurement is a consultancy and advisory for Procurement Transformation. To discuss further please feel free to contact us