CIPS 80:20 Vision – the Future of Procurement? (Part 2)

We’re continuing our look at the CIPS 80:20 Vision report which looks at the future direction of the procurement profession (see part 1 here). So here are their (summarised) “key findings” numbers 4 to 6 followed by our comments in each case.

4 Collaboration will be the new ‘normal’. The coming decades will see a major emphasis on taking innovation from the supply base. We may well be witnessing the dawn of the extended enterprise – this trend promises exciting times for supply professionals. Early involvement is also newly fashionable …..  as supply management professionals seek to extract more value from suppliers by leveraging supplier resources and integrating supplier functions with their own.

Increasingly, too, the profession will focus on networks. While organisations once charted their own courses in innovation, a transition from ‘buyers and suppliers’ to ‘integrated supplier networks’ will enable greater co-ordination of innovation across connected businesses and industries. Suppliers will gain power. …  Instead of them selling to you, you will be selling to them. ... Increasingly, too, we are seeing organisations share risks and rewards. As supply management professionals get better at segmenting, defining and measuring value, they will start to incorporate both gain- and risk-sharing into commercial relationships with suppliers”.

Spend Matters says - More good stuff here. However, the comment about suppliers gaining more power is surely market / product category specific rather than something that we can generalise about. I can see some areas becoming more competitive and therefore better for buyers whilst others get tougher.

One further thought – I agree about the need for more innovation from the supply chain. Surely then one major consequence will be a need for procurement to move away from our traditional “beat the supplier across the head” mindset and “savings” being the key measure of our success? That’s quite a profound change of focus for many organisations.

 5. Risk management will become everybody’s business as capacity and demand soar. Complexity will dominate our thinking –as emerging economies get fast-growing, successful and culturally different companies on the global playing field, the process of selecting suppliers will carry more risk, more complexity, and become more fluid. Everybody will have to wake up to the pervasive problem of supply risk – converging trends will make supply relationships even riskier as the decade progresses than they are today....

Spend Matters says - Absolutely – might risk management overtake “savings” as the primary driver for procurement functions over the next 20 years? It may well do. However, I suggest that we’ll see geo-economic- political issues over that timeframe that will have a huge impact on our organisations yet aren’t even on our horizon currently.

 6. As a consequence of these conclusions, professional skill sets need to change. Procurement professionals must become experts: respected; influential; persuasive; visionary; strategic; sharp; global; collaborative; executive and business savvy. We need to develop a new definition of ‘expert’, where the new supply professionals will be ‘students of their own industry’. …. The competition for talent will heat up … there will be intense competition to attract the best and the brightest into the profession and this will increasingly be on their own terms. We also predict that the profession will have to work in an age where the global centre of gravity has shifted from west to east, in an age when China and India will be powerful consumer markets in their own right. … At the same time, other lower-cost sourcing opportunities will emerge, and procurement must be ready and able to respond to this at short notice.

Spend Matters says - Again, not much to argue with here. I like the “students of their own industry” idea - however, we know that the most effective procurement professionals are those who understand how to operate successfully within their own organisations as well as externally. Both dimensions are critically important – you have to be able to exert influence with internal stakeholders to succeed. So let’s not forget that.

So, it’s well worth reading the whole 80:20 report if you have any interest in the future of our profession, and we’ll pick up on some of these points further in articles to come shortly. But let’s finish with the final sentence of the Executive Summary:

“The only certainty in all this is that the procurement landscape in 2032, the 100th anniversary of The Chartered Institute of Purchasing & Supply, will look very different to that which we scan today”.

Indeed.

Voices (3)

  1. Max Claps:

    I couldn’t agree more on the “might risk management overtake “savings” as the primary driver for procurement functions over the next 20 years?”. Even within my narrow focus area of public sector procurement of IT I’m observing that trend (https://idc-insights-community.com/government/smart_government/priceandcompliancevsagilityandriskapublicprocureme)

  2. DJF:

    I usually am a silent reader, but today I had an urge to comment, please be kind!
    I think Procurement is rapidly evolving. I don’t think any ‘one’ Procurement function is ever the same; I think the comment regarding Procurement “constantly reinventing their roles as business needs shift” is an important point, worthy even of its own article!

    I have been in procurement for about 8 years. I have worked in 4 different organisations. Currently Private sector.

    I can reflect from my own career Procurement’s development…

    At the start of my career – Procurement seemed transactional, administrative, back office and not very involved.

    Second Role – Procurement seemed more consultancy based, what are the volumes, lets benchmark, lets agree a pricing framework/shopping list!” is pricing competitive?

    Third role – How can Procurement assist Finance in delivering bigger value through our current supply chain – analysing Finance data, identifying ‘opportunities’, what is the most appropriate sourcing strategy? Persuade stakeholders it’s the right way to go, lower the cost!

    Fourth role – In my view the future of Procurement (medium-term (?)). Develop a function. Implement flexible adaptable buying tools to assist and educate stakeholders in best buying practice, Procurement to be the gateway, but stakeholders own the requirement, Procurement will assist in how this affects other deals, how does this renegotiation or new requirement link into another? How does it link into the overall business objectives, goals, strategy? How can we improve bottom-line, profit, also a big emphasis on what model will deliver the most significant business value (i.e. most attractive to shareholders – potential buyers!), also how can Procurement structure the most commercial terms for Cash Flow improvement across the business. In addition, focus on efficiencies.

    Ultimately – and to keep it simple…

    On assumption following is already decided:
    Specification
    Supplier Selection
    Service Levels

    Procurement’s role, the way I see it is:

    1. Review Service Levels – tightening / renegotiation necessary?
    2. Contract Content – Any issues?
    3. Negotiate robust Commercial Terms & Pricing!

    The biggest challenge I find for Procurement is the board/shareholders expectation; Procurement will deliver this year “x amount of £m savings!!” “off you go Procurement!.. do your thing!!”…. however, as I describe above Procurement is no longer just a focus on unit cost negotiations, this can only go so far.
    New requirements that require due diligence and Procurement engagement need time and attention to detail, these initiatives cannot be reported in terms of… was £1 now 50p. How targets and savings are communicated – again, probably another article in its own right.

    I wonder what others thoughts are on the ‘changing/evolving’ role of Procurement? and are the days of ‘SAVE £X!’ (primarily unit cost reduction) behind us?

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