The future of the function lies in its ability to provide value to the business. The core of the leading procurement professional skillset is not negotiation nor is it supplier management, rather it is ensuring that their activities are aligned with business need and maximising total contribution to stakeholders.
Historically, buyers have looked to boost their savings percentages, but is this meeting business need? Or is this merely striving for personal KPIs?
But what is business alignment? To understand more, Procurement Leaders’ research team has launched a new survey (which you can take here), exploring the commitment of those within the function to integrate with the business need.
Traditionally, procurement’s reason for being is cost savings. Buyers’ primarily objective is to find inefficiency within the business and eradicate waste. This has a clear impact upon the bottom line. But it also endows procurement a reputation for a single-minded focus on one side of the business equation (cost) perhaps at the cost of overlook a bigger picture (profit).
As such, winning over champions within the organisation is often a challenge. In order to justify their existence, buyers must deliver savings, but simultaneously they must work with partners that are reluctant to subject their businesses to rounds of austerity.
The skill in modern procurement is not so much of spinning schemes to extract hitherto unseen waste, but rather, to persuade business partners of the value of professionalised purchasing.
However, the factories that churn out buyers are excellent at installing technical knowledge and contract skills, but influence skills are yet to enter the production line.
The traditional skill set of procurement may be creating employees that are not equipped to meet the demands of the new situation.
Companies are opting for work-arounds. Some are routinely recruiting from outside procurement. I know of at least one pharmaceutical company that recruits to a rule of thumb that 80% of its category managers do not have a procurement background. The logic being, purchasing standards are easily trained in a two-week course, commercial acumen and inter-personal skills are much rarer (and more valuable) qualities.
The other alternative for talent-short companies is through automation. Many of the more advanced solution providers are giving us a glimpse of not just a ‘hands-free’ procurement world, but a function that may be ‘person-free’. Some of the forecast abilities, from data insight to market intelligence to direct purchase recommendation, may be out-of-the-box technological solution that companies can buy to replace a human function.
Both these pictures highlight the increasing importance of aligning closely to the business and offering a clear value-add.
In either scenario, the future looks bleak for procurement professionals that are content to rock back in their heels and rely on yesterday’s ‘best practice’. Rather, those that can sense the shifting sands and anticipate the future of a function that will be founded upon internal customer service.
How are you equipping yourself of these vital new skills? To help answer this question, you can take our business alignment survey here and compare your performance to the entire Procurement Leaders community.