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In this guest post, Procurement Leaders invites Bill Young of Kestrel Ops to challenge procurement to think differently in order to step out of the constraints placed upon the function.
While goals may be whats counted at the FIFA World Cup, that one-track mentality isn't going to help procurement teams get the results they need.
Chief procurement officers often play their game the same way as footballers. In the sourcing trade the talk is of sustainability, stakeholder-alignment and value-addition but, until these can be netted off against savings, there is only one goal – spend reduction. Everything else is a hygiene factor, with a minimum acceptable threshold but no reward for exceeding it. That is a pity: it prevents anyone, except its practitioners, considering procurement a profession. Organizations are worse off as a result.
According to a Stakeholder Management feature in Supply Management, "Procurement's raison d'être…is to reduce spend while maintaining quality and mitigating against…risks," and spend reduction is "the department's bread and butter." Consideration of 'customer demands' and 'broader goals' is qualified by concern about how spend is reduced, not about challenging or replacing spend reduction as the primary objective.
Apparently we should be polling our stakeholders regularly to find out what they think of us, but customer satisfaction can only be another hygiene factor. The new message appears to be: spend reduction is still your only goal, but try not to upset people. To elevate itself from trade to profession, procurement should do better than this.
The purchasing trade remains important. There is a continuing need to chase every pocket of spend regularly: to turn it out out, examine it, and ensure it does not conceal redundant articles or loose coins. The procurement profession however is endangered if the stakeholders it likes to call clients are, in truth, its spend-reduction victims. For, whilst procurement talks about the importance of partnership with selected suppliers, it has not adapted its role to support and develop them.
External spend is growing as a proportion of revenues; and business services account for an ever larger share. Seeing this growth, function heads are now alert to the impact of supplier relationships on their own departments' performance and image. As they grasp the importance of managing these, they ask the question, ‘Why would I leave this to procurement?'
"There is a movement…towards…an independent shared services organization" , and the mid-office is "the new area of focus to drive growth and productivity" . It is the glue between service providers (internal as well as external) and the revenue generators and includes contract negotiations, supplier strategy, and supply chain management. It is collaborative, decision-intensive, and networked. If procurement were less locked into its savings goal, it would be able to step forward and take the lead. Then it could truly move from trade to profession.
The mid-office is now the focus of business change and organization design. It is a role that could have been made for procurement but few organizations turn to it to establish and lead their new shared service centres
In football, too, much of the play is made in the midfield between your own half and your opposite numbers'. Perhaps there are things that sourcing should indeed learn from soccer.
Bill Young is the founder of Kestrel Ops and specialises in development of sales and procurement capability.
 From Herzberg's two part theory of motivation.
 Supply Management: Volume 19, Issue 6, pp24-27, Stakeholder Management.
 Harvard Business Review March 27, 2014 - Matthew Eatough, CEO Proxima.
 2013 Global Shared Services survey results, Deloitte LLP.
 Financial Times, June 11, 2011, Time for a New Concept, Middle Office – Paul Taylor.