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It is difficult to accurately predict the landscape in any given industry, product or service category in five – or even three – years’ time. We have had to accept there is great variation between markets today, which means procurement must both respond to this change and turn it into an opportunity.
Procurement strategies have historically focused on consolidation, pushing the function towards lower prices and greater savings. Procurement executives now must actively deconstruct many of the factors that have, until now, been reliable fixtures of any purchasing strategy. It was considered best practice, for example, to limit the number of suppliers providing any given product or service. Procurement chiefs now recognise that, in some cases, this actually poses a risk. In the event of a supply chain disruption, the buying organisation will not have any prequalified suppliers under contract to use as an alternative source of supply.
The processes we follow are also being deconstructed. For a long time, staff in other parts of the business would say procurement is centred around technology or processes. We were identified as being the e-procurement system, the contract system, or the supplier performance system. Over time, strategic sourcing became a bulleted checklist the function followed anything but strategically. Our aspiration for influence and top-line impact had fallen out of alignment with how the rest of the organisation saw us: as the owners of transactional systems and processes.
Now, however, companies are willing to look at their sourcing process and say: “The strategic thing to do right now is not the traditional three bids and a buy. It’s a thorough market assessment, looking at the suppliers we are currently working with, and approaching some of those incumbent suppliers to develop new contracts.”
This new approach may include changing the structure of the contract altogether. In the past, particularly in services categories, we have specified the qualifications of the person to be hired; now we are changing our approach to outsourcing. Instead of prescribing to suppliers what they must do, we may say they are free to work out the specifics based on their expertise – provided they satisfy our requirements regarding time, quality and pay.
This more agile approach can be supported further by the use of robotic process automation, which removes the need for human involvement in certain tasks. We must seize these opportunities. After all, procurement as a field is waking up to the fact that some of the processes that may have felt comfortable and reliable in the past are hampering our results. By being open to breaking down some of those traditional methods, we allow ourselves to be more responsive.
We can also consider the hierarchy of organisations. While such order provides stability and clear lines of communication, it can also stifle innovation. You may have an individual at a junior level who has a new and unique idea but, because of their position in the organisation, they are unable to communicate the idea to the person who has the authority to make it happen. With innovation an ever-increasing priority and disruption increasingly viewed as being positive, some organisations are now working to deconstruct hierarchies, allowing ideas to flow more freely.
Kelly Barner is the owner and managing director of Buyers Meeting Point, an online resource for procurement and purchasing professionals, and the director of intelligence for Palambridge, a virtual platform of on-demand procurement experts, technology and intelligence.
This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.