PMAC 2012: Procurement must evolve or die

Must become strategic player

June 7, 2012
by Emily Atkins

Moncton, NB: Procurement groups must evolve or risk becoming obsolete, or worse, an impediment to their organizations.

This was the theme of a presentation by three practice managers from consulting firm Deloitte at the PMAC 2012 national conference in Moncton on June 7. Rob Bucciarelli, Ryan Ernst and Isabelle Leclerc shared their perspectives on the procurement landscape and offered some strategies procurement managers can use to help move their organizations forward.

According to Ernst, there are multiple factors influencing the way procurement interacts with the business it’s in. These include:

  • Changes in the talent pool, with a massive cohort about to retire, demographics changing and insufficient postgraduate education available in supply chain;
  • Globalization, with free trade agreements making procurement less effective as an economic stimulus tool;
  • Technological change providing opportunities for more automation of administrative tasks, which should free up time for more strategic activities;
  • Higher risks, requiring more focus on risk management;
  • And expanding socio-economic aims, both customer and socially driven, putting pressure on procurement.

According to Ernst, procurement is moving from an administrative function to value creation: “Procurement is becoming key to effective and prudent financial management.”

He says failure to evolve leads to:
• Money left on the table;
• Higher cost structure than competitors;
• Lost opportunities to innovate;
• Increased supply risk and quality issues;
• Fragmented management of supplier relationships;
• Increased transformational cost, the longer you wait;
• Business lines bypass procurement to establish outsourcing and other supply relationships to meet 21st century business objectives.

Rob Bucciarelli explained what procurement groups need to do to start the evolution. First is leadership from the top to establish relationships within the organization. Leaders also need to set the tone that strategic procurement is a priority and they also need to be visibly supportive of initiatives that demonstrate the value of a more strategic role for procurement. Second, incentives that are supported and credible must be established, using metrics that suppliers trust. Third, you must have an experienced and credible team with a sound understanding of business partners’ technical requirements.

The place to start with all this, according to Bucciarelli is to perform a critical assessment of your organization’s capabilities in spend visibility, category management, supplier relationship management and demand management.