The end of Procurement
Author: Tim Cummins
COVID-19 is prompting numerous changes in society, the economy, and commercial relationships. Many are changes that would have occurred anyway, but the pandemic is generating a new sense of urgency. Examples range from the massive debates over racism and equality, to a rethink of economic management, the discussions over working from home and the need for increased collaboration in trading relationships.
Back in April, an article in the Financial Times highlighted one of the critical issues facing businesses. “Too late, many executives and owners have realized that by pursuing the holy grail of ever-greater efficiency, they sacrificed robustness, resilience, and effectiveness. In many cases, they will turn out to have sacrificed the business itself.” Already, in spite of government support programs, this is turning out to be true – for example, in June, business bankruptcies were up 43% on the previous year.
Much of the fragility in supply chains is a direct consequence of the procurement practices of the last 20 years. Investors, corporate boards, and politicians are grasping the urgency of change, the need for a fundamental re-think of supply strategies and relationships. Clearly, Procurement as a function must lie at the heart of this review.
Digitization plays a big role in this new thinking. It is not only that it offers streamlining, but it demands a re-think of business processes to ensure the right data flows and the delivery of value. This is one of the changes that represents a fundamental change for Procurement. A digital process creates the need for an integrated life-cycle view, from definition of requirements through to contract close-out or renewal. With this comes a fundamental change in accountability and measurement, with a focus on value over time rather than cost at a moment in time.
A second major force is the urgency of building resilient supply chains. This demands more collaborative supply relationships and increased transparency. Achieving these depends on increased levels of trust – and therefore a focus on the quality of the overall relationship, rather than on individual transactions.
'Procurement' remains an activity within this longer-term thinking, but must support the altered priorities. The roles of the future will focus on market management, economic assessment, funding and relationship quality. In fact, some procurement professionals have been steadily shifting into these more holistic roles – but this trickle is now set to become a flood as the old ways are abandoned.
For many, 'Procurement' has long been a tainted brand and they will not be sorry to see its demise. There have been many debates about potential name changes and re-positioning. Now, the nature of the change is much more fundamental than just a change of name. Among the big questions are how fast today's practitioners will awaken to the need for reskilling and whether they will make the transition in time.