Procurement in a Flat World — Impacts of Globalization

This morning, Philippe Courrègelongue, director of consulting for Emptoris EMEA, returns to continue his two-part series on procurement, globalization, and insight from CPO Agenda Discussion Series and LCCS.

I would summarize my broadest overall observation as "Procurement in a Flat World" -- borrowing from Thomas Friedman. It struck me that most participants at the CPO Agenda Discussion Series (although there were notable exceptions) were embracing the theme of globalization to levels previously unsuspected and working hard to transform their respective procurement function in that respect.

I will not comment on the fact that most, indeed, had already embarked on ambitious LCCS initiatives, outsourced their indirect spend, or off-shored entire chunks of their procurement execution. More interestingly, the following topics were discussed: what globalization means in terms of managing supplier relationships, how it affects innovation and creativity, and what it means in terms of people and lastly of technology.

Managing supplier relationship in different languages, cultures, and remote geographies emanated was probably the most challenging issue for participants. As LCCS business matures, both suppliers and procurement organization need to establish deeper relationships and selective partnership to take their programs to the next level.

Delivering an advantage (productivity, innovation, agility) trumps the search for direct cost savings.

Supplier Relationships:

In several critical geographical markets, participants noted that they needed to become attractive customers to their LCCS suppliers. During one of the debates, a consensus arose that relationship building had become more important in developing countries than in Western markets. There was also consensus that sourcing practices needed to be adapted to significant differences in the negotiation and contracting processes in these markets, particularly in China. Finally, establishing solid local presence seemed to be a no-brainer especially in China and India, often by leveraging the development of a commercial presence in these countries to add a significant sourcing presence.


Harnessing innovation and creativity from the supply base was another key topic of discussion. One participant coined it as both a necessity and a major threat -- in that suppliers could become overnight competitors as they increase their vertical integration. There seemed to be a call for procurement to transform its role to both promote collaboration with internal stakeholders and suppliers, as a trusted business partner, while remaining the gatekeeper, with a key role in managing supply risks. Leveraging suppliers' creativity through selective but deeper collaboration was also deemed critical to improving the quality of service while continuing to drive costs down.

The People Factor:

The "People" factor probably drove the strongest consensus in all debates. All participants without exception mentioned the importance of transforming the procurement function by increasing the skills of their teams to tackle procurement globalization. From the need to enable buyers to balance adversarial negotiation techniques with more collaborative and value driven ones; to mastering relationship building and establishing partnerships to develop innovation; to the ability to manage increasingly complex suppliers and internal stakeholders interactions. All seemed to agree the days of "traditional" buyers were over.


Of course, given my position, I see technology's role as a critical component of procurement globalization. Most participants did indeed recognize they needed to upgrade their supply management infrastructure to cope with the challenges of globalization: to manage supply risk through enhanced contract and compliance management; to foster innovation through appropriate sourcing and supplier relationship management tools and processes; to transform their organizations while delivering consistent service to their internal stakeholders through enhanced collaborative sourcing processes; to improve control thanks to spend visibility and to embrace complexity with tools enabling truly global capabilities (languages, currencies, support).

We look forward to a continuing discussion on these topics. And thank you to Jason for allowing us to join in the discussion here.

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