KPMG’s Exploration of Procurement in 2025: When the CIA Meets Purchasing

- January 16, 2014 10:29 AM
Categories: Innovation, Learning / Research, Procurement Commentary | Tags: ,

I’ve been covering highlights from the KPMG paper, FUTUREBUY: The Future of Procurement – 25 in 25, and today I come to the firm’s take on the role of intelligence as an integration component of the function, or procurement as “intelligent agent,” as the paper suggests. Here, the future skill sets and capabilities that KPMG explores begin to sound like those more in line with CIA (and Federal Reserve) analysts than most purchasing managers today.

Consider how the category or procurement leader of the future “will have the ability to consume large quantities of data, in multiple forms, and derive meaningful market insights as impetus to categories … [through] the development of data collection mechanisms that pull multiple government, private, and public indicators of material and labor price movements, capacity, and supply, and convert these through translation and decision analysis algorithms into specific early warnings and trend indicators. The emphasis will be on early directional detection, rather than on specific predictions on exact, perhaps rash and speculative, movements to be made.”

Where will these techniques apply? “Market intelligence forms the basis of not only category strategies, but supplier risk management, cost and demand forecasts, technology road maps, and predictive modeling.” As such, “procurement’s value to the business is increasingly driven by detailed knowledge of supply markets, and the ability to communicate nuggets of information based on deep intelligence and insight into the current and future state of these markets. This includes not only macro-level forces, but also specific movements in markets and individual suppliers that signify the tipping point of major shifts in market dynamics.”

What’s my take on these astute comments? Simple: what scares me as I read this is the degree to which many procurement organizations, outside of their top categories (and even within them, in certain cases), have outsourced not only the gathering of market intelligence – which is fine – but also the analysis of it. Ask yourself: do investment banks or McKinsey rely on offshore resources to build models, books, and decks, inclusive of key takeaways? No, they rely on these resources to do the heavy lifting, gathering, and first pass analysis. In nearly all cases, it’s still up to experts to interpret and put the finishing touches on the product (and yes, these experts could still build the feedstock to the deliverables if they had to).

But most procurement organizations lack this type of competency today around market intelligence. Rather, they’re either doing nothing (or little) across the board or relying on a third party for both the “what” and the “so what.” Not a safe place to be!

You can download the full KPMG paper if you’re interested in more on the topic. It’s worth the time to read it. We promise!

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