The world that procurement occupies is changing – and it is changing fast. Not so long ago the function was focused on hitting savings targets, which it mainly accomplished by squeezing suppliers.
That has changed, however. Buyers have found it increasingly difficult to find those savings while disruptive forces such as new technologies and natural disasters have shaken supply chains. As a result, the function has had to look at new ways to add value.
That search has led many businesses to develop more collaborative supplier relationships to uncover new product and process innovations. It has also seen the function take a close look at its internal processes and find more agile ways to operate.
Procurement chiefs hope this will allow functions to move at a speed they have not ever been known for. In fact, most other business functions would likely say procurement was one of the slowest departments within the business – it has been a bug-bear for other functions for many years.
The sixth annual World Procurement Congress, held in London, has focused on this search for agility and ways the function may thrive despite the disruption.
Here are the three key takeaways as to how functions from across the world have been approaching agility.
Tom Linton, chief procurement and supply chain officer at Flex, spoke on day one about the need for the function to have a ‘philosophy’. This, he said, is a set of policies and principles that govern organisational behaviour and support a legal and ethical policy framework to guide employees.
Linton told attendees he had written a philosophy when he was at LG and has written one in every function he has since worked in.
This foundation, Linton explained, gave him something he could build on and helped him reach the position he is in today, where procurement has a clearly defined role in the organisation and is able to push the boundaries in terms of implementing real-time risk management solutions. Flex has its Pulse Center, which informs the function of what is happening in its supply chain at that moment, allowing it to make decisions and act faster than ever before.
The modern age requires different leadership. To find new ideas leaders cannot act in the same way and in the same style that they always have, said Duncan Wardle, the former head of innovation and current CEO and founder at iD8&innov8.
Procurement chiefs should not punish what they perceive to be failures as these provide an opportunity to learn and find the ideas that will take both the function and the business forward.
To identify and help solve the issues the business faces, procurement executives should look outside of the organisation and not just focus on what is happening internally, Wardle said. At Disney, he had spent a lot of time with customers to learn why they chose to visit the company’s parks and what put them off. The findings led to major changes that pushed the business forward.
The minute you think your business is immune to change, it will fall behind and will be exposed to the risk of further disruption.
The landscape is changing due to an ever-increasing number of merger and acquisition deals while startup firms continuously release new products to market.
This was a theme that Thomas Udesen, CPO at Bayer, picked up on day two. A storm is coming and if procurement chiefs are not ready they will set their functions and the business up to fail, he warned attendees.
Bayer is contending with some of the world’s biggest issues. With population growth, procurement professionals are looking at ways the company can help feed people and keep them healthy. But the function is also being hit by new technologies.
Bayer’s team identified these issues and decided that it needed to restructure its operations to help solve these challenges. Procurement was a key part of that change and had been investing in its efforts to find innovation in the supply base.
Although the function didn’t have all the answers, Udesen said, the key was to keep searching and identifying the issues that could shape the business. Those who are slow to react and will find themselves left behind.
This article is a piece of independent writing by a member of Procurement Leaders’ content team.