A Licence To Play – Business Management Through a Procurement Lens

We recently discovered a new procurement book - A Licence to Play. It is written by three senior procurement, purchasing and supply chain professionals who specialise in change management, supply management, process development, team building and procurement transformation. They share their first-hand experiences of how to create business impact through procurement. It is not a 'handbook' but a book about 'business management,' seen through a procurement lens, in which the authors offer real-life examples of successes and mistakes to help procurement learn from the experiences of others to survive in an age of ever-accelerating speed of innovation.

It is what the authors consider "a roadmap for change management that can be extrapolated to any organization," because throughout the chapters the reader gets practical and implementable advice on how to change the impact of procurement on business.

Here is an excerpt which explains a little about where the book is heading. This extract follows the premise that a company has established itself and now must position itself in the supply chain. It must ask: What are the market expectations? What is the company’s real knowledge level? How are its supply-markets organised?

Two departments are in the driver’s seat to answer these fundamental questions: Marketing for the questions downstream (What are the sales markets? Who are the end users?) and Procurement for the questions upstream (How can the supply chain problems be solved? How can supply be assured technologically, commercially and sustainably with an acceptable risk profile?).

The role of the Marketing department will not be a surprise to the reader, but putting the Procurement department as a stakeholder to answer the other questions is rather new. Up to now, most companies have not taken account of the new environment in which they operate. For most organizations, the purchasing function was all about drilling down prices of materials and services needed, issuing purchase orders to secure requirements and to make sure they were delivered on time.

The new world is no longer a stable environment. Companies should not only perform a downstream analysis, but also analyze what is happening upstream. What are the technological developments that are being used by tier one suppliers and further up the supply chain? Where are these suppliers located? Are they located in emerging economies, and why? Is a material shortage likely? And if so, does the company have a plan B to cope with all of these potential problems?

The answers to these questions need to be given by the procurement people, whose task it is to find solutions. To date, most companies have not paid enough attention to these challenges, as they were not aware of their existence. There are examples where lack of control and lack of analysis of the supply chain caused companies to suffer and even struggle to survive.

Furthermore, ‘make or buy’ decisions are becoming ever more strategic. Previously, in most companies these questions were mainly handled by the Operations departments, sometimes supported by Marketing and Research and Development departments.

Procurement in most cases was only involved as an internal consultant, but certainly not as a strategic decision maker and member of the management team. Consequently, a lot of organizations made decisions based on incomplete information, which had its consequences … Once the ‘make or buy’ decision is taken, the Procurement department starts working on the supply of materials and services, based not solely on tier one suppliers but extending to the entire supply chain to tier 3 and beyond. By looking at the complete upstream supply chain, the Procurement department chooses at which points in the chain the company will be provided with the necessary materials, components, semi-finished or finished products.

Decisions on where the company will buy have an important strategic value. If the Procurement department decides to buy the most important raw materials or semi-finished products in the same continent in which the company is located, potential implications will be far less than if the company were supplied by firms situated in emerging economies on other continents.

Indeed, when a company decides to procure materials from emerging economies on the far side of the globe, not only must product price levels be taken into account, but also many other aspects such as more complex logistics, supply chain coverage, longer delivery times resulting from longer shipping distances, cultural differences, religion, working conditions on the supply side. How do these projects influence sustainability, as this matter is becoming more and more of an international issue?

A last thought when discussing procurement implications is this: the market analysis performed by the Procurement department should not be limited to the company’s own procurement chain, but should also consider the competition’s supply chain organization … This analysis is important and strategic advantages can be implemented structurally through a strategically well-designed procurement organization.

We will have a full and unbiased review soon by Peter Smith, whose precis is this:

“This is a thoughtful and insightful business management text that happens to focus on procurement and supplier management as its core area of interest. It is full of real-life experience from the authors, with both practical advice and conceptual thinking. It defines the way in which procurement needs to be executed to help organisations succeed today and in the future, and as such both procurement leaders and those in other functions should find it relevant and useful”.   

The book is available to buy here at a very reasonably price considering the expertise that has been pooled to create it.

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