Ray Collis

8 Reasons To Love Procurement

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I love sales. But, to be honest if I was starting my career over I would be very tempted to go to other side and become a supply management professional. That says a lot about the present and the future of the procurement and supply management industry.

Reasons To Love Procurement

I was invited back to my old Alma Mater recently to talk on the subject of sales to students completing a masters degree in business.

Not surprisingly the focus of my lecture was more on buying, than on selling. With two books (and a third on the way) focusing on how changes in buying impact on sales, the exposition of real world buying processes, buying decisions and buying trends was inevitably going to feature strongly. However, that I would start recruiting for the supply management industry came as a surprise.

After much discussion on the trends in how organizations buy, I found myself getting passionate on the subject of a career in procurement or supply management. Having watched the trends in the industry for many years I couldn’t imagine a more exciting career for a young and ambitious business executive.

Here are 8 reasons why a career in supply chain management is really exciting. Even if you will never switch sides and join the ranks of procurement, the list should help you to better understand the role and the motivations of the professional buyer.  It might also engender a new found respect and appreciation.

Reason 1: It is new and exciting

Supply chain management/procurement is new and exciting. It is the new global frontier of business and this is procurement’s golden age.

Purchasing has traditionally been regarded as a bureaucratic function at the organization’s edge responsible for ordering and replenishing supplies. It was concerned with paper pushing and form filling, in respect of transactions and supplies. However, buying has been elevated to new levels of importance and buyers have more clout than ever before. It is now a strategic business driver.

There are great advances being made in supply chain management/procurement, and yet there is a long way yet to go. Indeed, studies shows that only 16% of companies achieve procurement excellence, with 37% of companies at the bottom of the class. The rest are in the middle, or average category.

Now is a good time to say I don’t want to be in public sector procurement – no way! The obsessive focus on obeying the rules has driven both the innovation and the fun out of much public buying. It is procurement and supply management in the private sector I’m interested in.

Reason 2: It is the new basis of competition

The most exciting companies of the past decade – Apple, Dell and Amazon to name just a few – have all had supply chain management at their core. Indeed, they could not have succeeded without it.

Supply management is the new and perhaps ultimate source of competitive advantage for modern business. It is at the core of new business models – from manufacturing in low cost economies to selling across the web.

Today’s global industry leaders, such as Apple or Dell, make up in market capitalization what they lack in bricks and mortar. They own few factories, warehouses, or trucks. These have been replaced by a global supply chain that can produce at low cost and yet meet stringent quality standards, respond swiftly to peaks or troughs in demand and take new products from concept to reality in rapid time.

Production engineering is no longer the source of competitive advantage. It does not matter who owns the factory or where it is located. It is time to move over Demming – Total Quality Management has been superseded by Supply Chain Management.

It is no longer about production engineering, but re-engineering of the very shape and structure of the organization. The value chain of modern business is the supply chain and that makes supply chain management the place to be.

Reason 3: It is strategic

The CPO increasingly has the ear of the CEO and CFO – it has direct access to power. That is because few managers have the potential to impact on the bottom line in the way that the head of procurement/supply management can.

As every MBA (and indeed every salesperson) knows; the way to improve the bottom line in a time of low growth is to cut costs, slimline production and drive efficiencies generally. This is something that procurement and supply chain managers have done very well.

At conferences procurement managers proudly boast of savings of millions delivered from procurement initiatives, with savings of 15-35% regularly being quoted. However, it’s impact on business performance goes well beyond cost savings.

Supply chain management is strategic because it matters to the longer term performance of the business. It will be called upon to support the implementation of almost any strategic initiative within the business and not just those that involve procurement.

Reason 4: It is global

Globalization has and continues to be the dominant economic trend of the past 3 decades. Supply management is the oil in the cogs of global markets and supply chains that span the world.

Supply management transcends borders, cultures, languages, currencies and climates to bring products from one side of the world to the other. It has reshaped the economic order with the rise of the Chinese Indian and other economies as low cost manufacturing powerhouses.

Reason 5: It is complex and challenging

Orchestrating a supply chain that span different continents and integrate 1,000s of diverse actors, from primary subcontractors, to the suppliers of the smallest components or parts, entail great complexity and challenge.

Operating at the interface of supply and demand effective supply chain management is key to:

(a) The demand for more rapid innovation, including new products with rapid time to market and shorter product lifecycles.

(b) Risk management and resilience in the face of:

  • increased market volatility
  • sudden and unpredictable international supply risks (from Tsunamis to political revolutions).

(c) Legal compliance, from product traceability of certain goods, to diverse trade, employment and other regulations across the variety of international markets. It requires thinking globally while complying locally

Reason 6: It pays well

Of course any career no matter how exciting it is has to pay well and procurement/supply management does not disappoint in this respect. In 2011 the average salary for a CPO or Head of Supply Management was paid $230,000 according to the ISM Salary Survey.

Plus you get paid for performance, with bonuses being earned by 60% of procurement executives and typically amounting to 20% of the total gross salary received (ISM Salary Survey 2011).

Reason 7: It is cross functional and collaborative

While traditionally procurement was traditionally seen as stand-offish and confrontational, best in class is highly collaborative in style. That means it engages with managers from all across the organization.

While it may have the authority to tell people what to do and to enforce compliance with procurement rules and procedures, it uses its power carefully, seeking to collaborate rather than control.

It’s role includes evangalizing a better approach to all aspects of procurement, from sourcing to supplier management. It does not necessarily seek to wrestle the decision away from the front line manager, but rather to support the manager in the decision making process.

Because procurement is increasingly cross-functional in nature, it draws its team from all disciplines and backgrounds. It may second an engineer from R&D to head up a sourcing project for the components required for a new product, or hire a ex supply industry salesperson to manage and negotiate with suppliers from that same industry.

Reason 8: It requires a diversity of skills

Succeeding in procurement and supply chain management requires a broad diversity of skills. The skills required in the past, such as; hard-balling suppliers, policing compliance with procurement rules, and administering paperwork and procedures are now longer adequate. Instead what is required are CEO type skills, such as;

  • Leadership
  • Driving business performance and achieving business results
  • Strategic thinking
  • Partnerships and strategic alliances
  • Internal collaboration and communication
  • Understanding markets, predicting change and managing risk
  • Innovation and creative thinking, including; new products and new markets.
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