A day-long workshop in Munich with a group of procurement executives, as well as folks from consultancy firm H&Z, offered a great opportunity to consider some of the more pressing considerations procurement faces.
Labelled the ’25+ Procurement Athletes’ Think Tank’, the group explored several themes throughout the day, including collaborative value creation and supplier-enabled innovation (SEI), digitalisation, next-generation talent and skills initiatives, the 2025 vision for the function, among other topics.
Of course, what made the discussion particularly valuable was that all these subjects are inextricably linked – digital transformations are all well and good, but unless CPOs have the right people to support and drive them, they won’t go far. The same goes for SEI initiatives and deep supplier-collaboration efforts.
A great number of issues were covered, but it’s worth exploring some of the concepts in more detail here.
Having been on the road visiting various procurement teams this year, one thread of conversation always seems to hit a nerve, and that is trying to understand what procurement’s fundamental, underlying purpose is; its raison d’être. Why does the function continue to exist and what value does it bring to the organisation?
Attendees in Munich engaged in a deep discussion about whether, in the years to follow, senior leaders would look at their procurement structures and seek to dismantle them. Why have a central function, focused on procurement – surely the capabilities could and should be distributed around the organisation to those who actually need to use the goods and services the function buys?
This hypothesis led to much soul-searching, but also to some creative thinking. After all, if the procurement function in its current guise may not be around for the long term, the question remains as to what procurement chiefs need to do to ensure they still have a job in ten years’ time?
I recently visited Dutch chemicals and life-science business DSM. The company has a pretty concise and meaningful procurement vision, which is focused around ‘unleashing the power of supplier capabilities’. It’s easy to say, but difficult to do because more often than not procurement is focused on ‘controlling the behaviour of suppliers’.
While procurement is in a privileged position, it must do much, much more if it wants to unleash the ‘power’ that DSM refers to. It’s about being open to new ideas, about thinking more long term and about being less paranoid about collaborating. It’s also about experimenting and failing fast.
All of this leads to a couple of conclusions. First, you need the right people to drive this behaviour. Second, you need the right infrastructure and structure.
I can see the central approach to procurement becoming less ubiquitous in the future as company leaders see greater value in local or regional approaches. Better use of data and digital technologies can still drive leverage and scale without the need for a central function, for instance, and the added flexibility and choice handed to local markets can lead to much improved customer value.
Procurement has been discussing what the future has in store for it for some time. Not all of that has been entirely realistic, both in terms of the predictions or the timelines.
But it’s worth spending some time mulling over what might be different in 2025. Will procurement capability be embedded into corporate toolkits and digital dashboards, for example, allowing users to order what they need easily and without the need of a central function?
Which procurement processes will no longer be dealt with by humans? Negotiation? Market intelligence? Purchase-to-pay? Risk management? Supplier qualification and onboarding? The list could get pretty long pretty quickly.
While I certainly don’t think that the future is bleak for procurement, I do think it will be very different. As such, you need to have a plan and start thinking about it now.
This article is a piece of independent writing by a member of Procurement Leaders’ content team.