It is Time To Re-think Procurement!
It is our mission to get more sellers exercised (maybe even excited) about trends in procurement. But that requires a fundamental re-think of procurement and its role. The message is; ‘if you think procurement doesn’t matter think again!’
We get excited even worked-up about the trends in procurement and the broader supply chain. And from our vantage point in researching the industry there is much to be excited about. However, not everybody gets it.
The term ‘procurement’ is problematic. For most salespeople it is simply a word that is hard to get excited about. It creates the wrong – all to limited – associations, including:
- ‘The administrative function associated with buying…’
- ‘Paperwork, form-filling and bureaucracy…’
- ‘A more rigid / procedure led approach to buying…’
- ‘The buying of lower value items / supplies…’
- ‘Governmental/public sector buying…’
- ‘Big organisations and how they seek to control spending…’
- ‘The people who are brought in at the end to hard-ball suppliers over price’.
As a result the implications for sellers of important trends in procurement are easily obscured.
Do you have an out-of-date view of procurement?
Out-of-date views of procurement can lead to mistaken beliefs about the role of procurement. That can result in sellers being unprepared for imminent changes in buying behaviour and strategy of their customers and prospects.
Think Great Companies!
Sellers need to ditch out-of-date misconceptions of the role and scope of procurement. It is time to re-think procurement!
To re-think procurement, think of the companies that you love. What is it that makes companies, such as those shown below, great?
Every day when we buy from these customers we pay tribute to the new role of procurement and the broader supply chain function. It is just we don’t normally think of it that way!
OK, we buy from these companies on the basis of price, speed of delivery and product range, but what we are really buying is great procurement!
It is best practice procurement and supply chain management that enables Walmart, Apple, Dell and others to meet our increasing demands as customers and to stay at the top of their industries. The companies you love, love procurement!
As consumers we take for granted the range and variety of goods that are now available to us. We also take for granted the ease with which we can order online a product that is made half way around the world, can be tailored to our specific requirements and swiftly delivered to our home.
We also take for granted the speed at which new product models are released and the pace of technological advance. However, all these are made possible by the interplay of procurement and the broader supply chain management function.
Think Shareholder Value
But if we love these companies, so do investors and the stock market. It is no accident that these companies are among the most successful in their industries. Best-in class procurement doesn’t just deliver increased profits from operations, but also a higher return on shareholder’s funds. Procurement matters because it delivers superior business performance.
Best in class procurement and supply chain management has put these companies at the zeneth of the consumer driven society. They have changed the world and their approach to the new procurement function that is at the hearth of that change.
Have you been underestimating the importance of the procurement function?
Think New Economic Order!
Procurement is the talisman for a new era of global commerce. From the rise of India and China as super powers, to the emergence of online super retailers, such as; eBay to Amazon.
Procurement is the poster child for a fundamental shift in terms of not just how, but where; the world does business. One of the most unmistakable trends are globalization and in particular the rise of outsourcing to low cost economies.
Procurement reflects the new shape and structure of the corporation. From vertical to horizontal integration and international to global expansion. Take the Ford Corporation – it once owned the steel mills and rubber plants needed to supply its car manufacturing plans. But such a vertical mammoth is now inconceivable. Today’s large corporations build and manage supply chains, rather than factories.
Modern procurement is challenged with the task of orchestrating thousand’s of tier one suppliers and perhaps tens of thousands of tier 2, tier 3 and raw material suppliers located around globe.
Think Supply Chain!
Procurement is morphing into Supply Chain Management – perhaps it will becomen the ultimate source of competitive advantage for modern business. 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.
So, when you think ‘procurement’, think again – it’s Procurement + Supply Chain Management (PSCM).
Think Implications For Sellers
The word ‘Procurement’ is just a convenient label for a wide range of trends at a micro level in the enterprise, as well as at broader macro level in the marketplace generally. These trends (many of which you will see listed here) will impact on many companies including yours.
Now that you have re-thought procurement and its role, isn’t it time to pay more attention to trends in procurement and to start preparing now.