Only Supply Management Has a Future

In yesterday’s post we said that Procurement is Doomed, Entombed, and Marooned and we meant it.

No employee is going to send a paper request for authorization to Procurement to purchase a new phone when his dies, to authorize a laptop repair when his breaks, or to detail his need to purchase a few cases of paper when an emergency print run has to be done in house because the delivery from the printer got lost. They’re going to go online to Amazon or Office Depot or Apple and just order the product or schedule the service they need, and schedule the (same-day) delivery when they need it.

No analyst is going to wait for the quarterly market report from the old-school analyst firm when up-to-date online indices with past, current, and projected trends are instantly available at the click of a button. Another p-Card charge and it’s in their hands.

When demand increases rapidly, Sales isn’t going to wait for Procurement to negotiate a better logistics rate with a current carrier, they’re going to phone up the supplier and ask for expedited delivery on as many units as they can get their hands on.

And if a critical project requires additional contingent labour to be completed, HR is going to phone up the trustiest supplier in their rolodex (even if it is the most expensive) or go online to talent marketplaces to find talent for deliverables that can be outsourced and just get it done.

And so on. Procurement is doomed, entombed, and marooned.

But Supply Management is not. (And that’s why Sourcing Innovation is all about Next Generation Supply Management — the doctor saw the beginning of the end for traditional Procurement long ago and has been working hard, year after year after year, to educate you on what you need to do to transform your organization into an industry leading Supply Management organization that will not only survive, but thrive and get its seat at the table).

You see, while Procurement is focussed on buying for the organization, Supply Management is focussed on helping the organization buy. While Procurement is focussed on supply, Supply Management is focussed on supply assurance. While Procurement is focussed on supplier management, Supply Management is focussed on supplier development. And while this may sound the same, as the differences appear subtle at first glance, nothing could be further from the truth. Let’s take them one by one.

Before the age of the internet where an employee could go online, do a few searches, and not only quickly find the product she needed (and get it delivered next day), but find it at a good price too, it was difficult to research suppliers, research market pricing, cut a purchase order, and get the product in a timely manner. Without up-to-date knowledge on the supply market, market pricing, and delivery options, buying something was quite a hassle and many employees and departments were happy to hand off as much as they could to Procurement. But not anymore. People believe they can do it faster, better, and cheaper if they do it themselves — and a Procurement organization that tries to say otherwise is not looked upon very lovingly. However, a Supply Management department that realizes this and instead looks for ways to empower employees to do their own buying in a way that allows them to increase compliance is appreciated. A Supply Management department that finds a single platform that can integrate the marketplaces employees normally buy from with preferred vendor platforms, organizational pricing, and push on-contract and preferred products to the top of the search results is appreciated. Employees want one-stop-shops to buy their office supplies, software, electronics, and incidental needs just like they want one-stop-shops to book their air travel, shuttles, and hotels on a business trip. A Supply Management organization that enables that is cheered.

Moreover, a Supply Management organization that walks into Marketing and offers to teach them how to disaggregate creative spend with editing and print services so that each can be managed appropriately, which allows savings in non-critical categories identified and applied to new projects or top creative talent to insure better results, is welcomed compared to a Procurement organization that just wants to put the spend up to auction or consolidate it for discount leverage.

In addition, as SI has been stressing for weeks now, while supplier (relationship) management is important, supplier development is even more so. Having a supplier that comes to you at the first sign of trouble and works with you to resolve the issue before a delay or disruption occurs is good, but having a supplier that is able to constantly identify potential issues in its supply chain and work with its suppliers to prevent them is even better. Having a supplier that can implement any design for a custom manufactured component that you throw at it is good, but having a supplier that can provide suggestions on design improvements that will allow for lower cost materials and cheaper manufacturing processes without sacrificing quality is better. And so on.

In other words, while Procurement is focussed on cost reduction and control, Supply Management is focussed on value generation, of which cost is just a tiny component. And that’s why Supply Management has a future while traditional Procurement is doomed, entombed, and marooned.