Sourcing The Future

Canadian business leaders from a cross-section of industries met at Purchasingb2b’s Future of Smart Sourcing virtual roundtable in August, 2011. The roundtable was sponsored by Grand & Toy, a Canadian business solutions provider dedicated to promoting thought leadership on sourcing and strategic procurement in the Canadian supply chain and procurement industry. This is an editorial report detailing highlights of the event.

October 5, 2011
by Michael Power

Canadian business leaders from a cross-section of industries met at Purchasingb2b’s Future of Smart Sourcing virtual roundtable in August, 2011. The roundtable was sponsored by Grand & Toy, a Canadian business solutions provider dedicated to promoting thought leadership on sourcing and strategic procurement in the Canadian supply chain and procurement industry. This is an editorial report detailing highlights of the event.

Purchasingb2b print edition, September 2011

The future may be unwritten, but that doesn’t mean we can’t prepare for it. Purchasingb2b editor Michael Power talks to five procurement experts for a virtual roundtable about what they see on the horizon, as well as the trails they’ve blazed so far.

With the busy schedules procurement professionals juggle, looking backwards into the past or forwards towards the future can seem daunting. Purchasingb2b gleaned the collective wisdom of five procurement experts from across and beyond the purchasing field. Our virtual roundtable spoke in separate interviews about what has gone into making procurement the profession it is today, and where they see the field heading in the short term as well as 10 or 20 years from now. They also spoke about what skills purchasing people will need going forward and what the procurement professional of the future will look like.

Our experts were: Dan Georgescu, global purchasing, Ford Motor Company of Canada; Joel Ramsey, partner, McCarthy Tetrault; Denise Shoesmith, vice-president, materials management, HealthPro Procurement Services Inc; Patricia Moser, vice-president of supply chain at Grand & Toy; and Donald Harvey, director of transportation contracting at Canada Post. Grand & Toy sponsored the discussion.

Dan Georgescu

Joel Ramsey

Denise Shoesmith

Patricia Moser

Donald Harvey

The story so far
To first get perspective on the topic, our panelists weighed in on how procurement has developed until now. Echoing several participants, Grand & Toy’s Patricia Moser noted that, perhaps, 20 years ago procurement was less a profession and rather a group of tasks performed by employees within an organization who had ended up performing those tasks through default.

“It’s a continual evolution—the level of professionalism in procurement has certainly increased significantly over the years,” Moser said. “Years ago, you didn’t really need any training to go into it—not even from a business perspective. Now you see a lot more high-level professionalism leading procurement organizations, shaping them to be key supporters of the whole organization.”

The reason for the shift, she said, is procurement professionals—once isolated within different organizations—have been able to demonstrate the positive impact they can have on an organization.

From the perspective of healthcare, the amalgamation of hospitals’ procurement functions into large, multi-shared organizations has changed the way the profession functions, said Denise Shoesmith of HealthPro. A decade or more ago, much of the work of procurement was done in a hospital’s halls rather than through a formal process, she said.

“If you needed something decided, you went and found the doctor or the head nurse or department manager and you had a conversation and you sorted things out,” Shoesmith said. “That’s just so different now; I think that’s a key driver to the way we have to change our business.”

Procurement professionals now must decipher how to work within various cultures from different healthcare institutions, she said. Because of that shift, hospitals are recognizing more and more the importance of the procurement function. “I like to think of it as procurement getting out of the basement and up onto the main floors,” she said.

Canada Post’s Donald Harvey noted the skill level needed within procurement had once been much lower. He also agreed that many people once “fell into” the job from other areas within an organization before doing more activities related to procurement, such as putting purchasing orders in place. “It wasn’t necessarily a career choice they made, it was just a bit of an evolution into that role.”

A view from the C-suite
But since its earlier days, our participants agreed, procurement has taken on a more active role within many organizations. Some procurement professionals have advanced to a spot in the top rungs of their organizations. What accounts for that shift?

“Traditionally, purchasing has been identified by the financial officer as a cost centre because they spend money,” said Ford’s Dan Georgescu. But more and more, he noted, spend has become a strategic activity, with purchasing identified as a source of competitive advantage as opposed to a cost centre. In large corporations (although not necessarily in smaller companies) the chief procurement officers are usually holders of post-graduate degrees with a thorough business education, Georgescu said. This is an advantage when discussing procurement matters with those in the C-suite, he noted.

“In order to convince the decision makers of the strategic nature of the procurement department you have to be able to speak their language and be able to show them return on investment, net present value, and use the tools and language of the financial profession,” he said. “So whenever you have to invest in something you have to use the business case approach.

The fact that some organizations now have chief procurement officers whose role is to be the executive who directs an organization’s purchasing functions at the highest level is a clear example of how the profession has developed into the C-suite, said McCarthy Tetrault’s Joel Ramsey, who advises clients on strategic sourcing, technology, software development and licensing transactions.
The realization that businesses can’t run without such high-level procurement executives has, in large part, come from a changing understanding over the last 20 years of what constitutes a business, Ramsey noted. Retailers are moving away from being only a store to more of a service—for example, operating in part or entirely online. As the technology needed to operate virtually becomes more complex, the role of the purchasing professional becomes ever more crucial.

“The guy who’s in charge of negotiating the deal to get the right IT system, and the website up, and the payment processing systems and the mobile apps, those are the guys who need to be well integrated into your strategic plans as a business,” Ramsey said.
That influence will continue to grow as procurement professionals build relationships with groups within an organization, such as sales and marketing teams, said Moser. The professionals within those departments will then begin acting as champions for the importance of procurement.

“If you have a lot of those champions throughout the organization, the communication goes out that you’re an effective business partner, and that’s where you want to be,” Moser added. “At the senior levels, you don’t want to be the kid pressing the face against the window while the big kids are having the meeting in the big room. You need to be at that table.”

Trends for the future
As that influence grows, the need for procurement professionals to become more strategic about their roles within organizations will increase, said Shoesmith. In healthcare, as procurement becomes a more valued resource, the need to understand the supplier marketplace will become more important, she noted.

“We have to implement—and anticipate the need to implement—practices that can deal with issues that may be coming up,” Shoesmith noted. For example, with a sizeable drug shortage in Canada and the US, there’s a growing need to anticipate and address issues, be flexible and adaptive to ensure hospitals get drugs they need to continue to offer care. “To do that you have to be very strategic about what might happen. What does the pipeline look like? Where’s the base of production? What might influence those shortages or back orders? Going forward, and in the immediate near-term, it’s even greater recognition that this is a global marketplace.”

The trend towards that growing influence at the highest level within organizations will also lead to more procurement and supply chain professionals actually leading corporations, said Moser. The
trend has already started, she noted, with more people from the profession responsible for more within organizations.

Moser presented an image of the future of procurement and supply chain based heavily on technology. In the future, she would like to see a database that can supply strategy, an approved vendor list—everything procurement professionals need—that can be called up immediately. The database presents, say, the three best options, the best cost, value and so forth. The procurement person tells the database which option is the best and within minutes the database technology has retrieved the necessary approvals.

Whether that scenario materializes remains to be seen. But Moser noted there will be a move towards more online purchasing opportunities. While there are signs of such arrangements, the concept hasn’t fully caught on yet, she said.
“I think you’re going to see more, potentially corporate-type eBay websites which will increase competition, and potentially provide more of an opportunity for smaller businesses to actually gain some business,” Moser said. “In some aspects you can almost create a portal where you have certain requirements and it becomes an internal eBay, or a group eBay—I imagine a version of that into the future.”

What you’ll need
What skills and attributes will the procurement professional need in the future as sourcing moves up the corporate ladder? What will the procurement professional of the future look like?
While still requiring many of the skills important to them today, Moser said, the procurement professional of the future will need the ability to build partnerships within organizations. Having skills outside of their purchasing niche will serve the procurement professional of the future well.

“I think that every procurement person—now and in the future—should have sales training,” she said. “We see a lot of sales people, but to actually step into their shoes and see how they get trained and what the thought process is [is useful]. Sales people sometimes can make the best procurement people because they know how the other side lives and works.”

A general education in business will also serve them well, she noted, since an understanding of an enterprise as a whole will help them break out of being a niche player and move into an organization’s higher echelons. “I think you’re seeing a lot more of that,” she noted.

The best-in-class procurement managers will have the same skills as any executive within an organization, noted Ramsey. Writing skills, an understanding of contracts and the ability to bring people together are all-important characteristics.

“A really good procurement manager is also a project manager, which is a really tough skill to master,” Ramsey said. “The procurement professionals who distinguish themselves have these skills more than others.”
For Shoesmith, enthusiasm and curiosity top the list of important skills for procurement professionals to pursue.

“They really have to want to understand,” she says. “They’re not just pushing a pencil. They need to be very much involved—and enthusiastic about being involved—in the process. They’re trailblazers, they’re trying to figure out what’s happening out there. It’s the folks who are willing to take a chance, those who are willing to do things perhaps differently than the way it’s always been done.”
The core skills of procurement remain important, said Ramsey.

But a diversified knowledge of other areas such as marketing, finance, technology, accounting and human resources are growing in importance for procurement managers. As well, a degree and a broad education are becoming increasingly important.

“This profession is changing quickly, it’s very complex and it touches on so many areas,” Ramsey said. “They need the ability to pick up new knowledge quickly. Having that degree gives them that broad base. And I think they need a professional designation, and the focus on continuous learning that comes as part of the commitment to a professional designation.”

For Georgescu, the ability of the purchaser to evaluate the strategic direction of an organization, align the strategic objectives of various departments and develop KPIs that will be in line with the strategy will be important attributes.
“They have to have the numeric tools, the math, behind the business cases,” he said. “They have to have knowledge of accounting, knowledge of statistics. More and more, uncertainty becomes the rule, as opposed to the exception in our day-to-day activity. The way to deal with that is to apply pragmatic statistical rules to predict outcomes.”

For example, when evaluating suppliers, procurement professionals will need to be able to look at the financial statements of those companies and understand the economic sustainability of those companies.
“This is the kind of competence that was not required up to now,” Georgescu said.

Challenges ahead
With all the skills and attributes they will need going forward, the road procurement professionals travel in the future will likely have a few bumps. One challenge those working in the field must deal with is thinking outside of the purchasing silo and taking stock of how they fit into an organization’s overall structure and strategy, said Moser. Procurement people must step up and work in areas that aren’t necessarily within their comfort zone, and get used to providing input and contribution enterprise-wide.

“I’ve seen so often procurement people going into a full-scope meeting that might be about a whole bunch of different aspects of the business and either not contributing or contributing but only from their perspective of the world,” she said. “I think it’s great to be proud to be really good at what you do, but I think we allow ourselves to be niched too much in organizations.”

According to Harvey, the field’s complexity—for example, in terms of case law—will remain a challenge for procurement professionals. “The challenge to the professional is to keep up with that case law,” he said.
To Shoesmith, the challenges procurement managers of the future will face are similar to those they face now. In health care, the procurement person must be able to manage conflicting needs from disparate groups and still work within provincial requirements.

“It’s really ensuring that all the t’s are crossed and i’s are dotted—everything is fair and equitable and transparent, and we still come out with the best end solution for whoever we’re purchasing for,” Shoesmith said.
In a short time, procurement has made great strides from its place as a “default” job in many organizations to a highly skilled field that now has a view to the highest rungs of many organizations.

Senior executives are realizing the value procurement brings to their organizations’ strategic goals. Going forward, procurement managers who work to refine a broad spectrum of skills and knowledge, boast high-level education and stay abreast of technology will be in a better position to claim a much-deserved spot in the C-suite.                         b2b

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