Daily Archives: May 18, 2016

Procurement Is Dead! Long Live Procurement! Part IV

Mr. Smith is right. Procurement is dead. It was doomed, entombed, marooned on a desert island, and passed away peacefully in the night long after everyone had forgotten about it. It’s dead and buried. And you should thankful that the Romans closed the door on the Egyptian Empire’s burial chamber or you would have been buried with it.

And, as we explained in painful detail in Part II, there is no more need for a purchaser. Like video killed the radio star, the internet killed the purchaser. And good riddance too. The innovations that led to the purchaser’s demise are far superior than even the John Henry of purchasing could ever be.

Procurement is Dead!

But with the death of every monarch, a new monarch is appointed.

Long Live Procurement!

A new age is coming, and Procurement will lead this new age. But it won’t be the Purchasing of old where catalog buyers sat in dark rooms ordering widgets and sprockets, processing mountains of paper, sending requests by fax, and comparing results in lotus 1-2-3 spreadsheets on MS DOS.

It will be the Procurement of new where senior analysts equipped with actionable intelligence make decisions that not only reduce costs, but increase quality and reliability across product and service lines and, moreover, increase the value with each decision made.

These senior analysts will amalgamate market intelligence from raw material and commodity markets (food stuffs, metals, petroleum, etc.), credit and risk providers (Dunn & Bradstreet, Bureau van Dijk, CreditSafe), CSR providers (Ecovadis and Sedex Global), third party auditors, and so on; integrate this data into extensive cost and risk models; and then compare them across suppliers to determine the real cost of each product and supplier from an organizational perspective now, 12 months ago, and with reasonable certainty, what it will likely be in 12 months. They will be able to make decisions that balance cost, risk, and quality, and also take supplier innovation into account.

But this is just one thing that these senior analysts will do. Because they will also have deep insight into best practices and processes across the supply chain, they will also have deep insight into best practices and processes that can help each organizational unit. Not only will they have insight into buying office supplies, and sending out RFPs for custom manufactured products, but they will have deep insight into best practices for

  • Marketing Spend Management
    their insight into production can be levied into managing both print runs and media production
  • Human Resources
    as their insight into services management can be extended into managing temporary labour
  • Legal
    discovery services, standard contracts, and market intelligence are similar to specialized HR services, other market intelligence services, and standard publication acquisition
  • Warehousing
    as their total cost modelling capability will be just as applicable to modeling the operating cost breakdown of a warehouse as it is to modelling the production cost breakdown of a super widget
  • etc.

These analysts will do more than just send out simple RFQs and make simple purchasing decisions. They will define category, supplier, and even supply chain strategies and execute them strategically — starting with spend and value-based analysis, continuing with the collection of the right supplier and product information, followed by the right bidding and award strategy for the situation at hand (be it multi-Round RFX, e-Auction, re-negotiation with incumbent, etc.), which could even include a supply chain redesign, and concluding with a contract-based award to one or more suppliers that will be managed through the lifecycle of the contract. No more set it and forget it. Milestones for certificates, certifications, and reviews will be set and completed. Purchase orders will be regularly reviewed for completeness, correctness, and appropriate responses. Performance will be monitored and, if necessary, corrective action plans put in place and executed. Supplier Relationship Management (SRM) with strategic suppliers will take a front seat. Tactical processes and data collection will be automated as much as possible so that only exceptions will be addressed as needed and more time will be available for education, best practice improvements, supplier, and Procurement development and improvement.

Procurement will listen to the needs of the key stakeholders, synthesize them into a cohesive whole, and insure they align with the goals of the business to make sure that the right purchase — not the lowest cost or most readily available — is made every time. They will be strategic leaders that lead the way vs. tactical soldiers that just execute last year’s market plan. And they will generate more value than was ever generated simply by taking 5% (or 10%) off the top.

And we will continue to describe the tools, technologies, methodologies, and innovations that Procurement will use to form a new Procurement to replace the purchasing that has finally been entombed like the pharaohs of old.

Procurement is dead! Long Live Procurement!