Jason Busch procurement scenario 1 – “Extreme localization and decentralization require new approaches”

We explained yesterday about Jason Busch and his five scenarios for procurement over the next decade. Here is the first. (You can read his full original article here).

Scenario One: Extreme localization and decentralization require new approaches

We are seeing an increased drive in Europe for “local sourcing” – arguably one step away from an unhealthy protectionist attitude, and procurement people need to help keep the right side of that divide.  On the more positive side, I was impressed by the Anglo-American presentation at the Procurement Leaders event a while back. They gave a great example of using the promotion of a local supply chain in developing countries as a strategic business lever for their mining operations.

Jason perceives that there will be an increased drive to local decentralised procurement, driven by a number of external factors such as increased shipping costs and greater political pressure to “buy local”.  Here are some excerpts from his piece:

Extreme localization and decentralization will require new approaches in the areas of negotiation, supplier management, tactical buying and broader functional planning and execution, among others…. center-led supplier rationalization can significantly increase risk when regional disruptions occur because of weather or other natural disasters).

What might be some consequences for procurement if this does come to pass? Here’s Jason again:

…this might require significant supplier qualification work to identify and on-board local suppliers that can help meet offset requirements. Or in the case of CPG and food companies, it may include working with local suppliers and creating regional supply chains to ensure the availability, safety and logistics for certain ingredients and overall spend components (e.g., spices, longer-shelf life in non-refrigerated environments, packaging for non-palletized environments).

And there would be major implications for how we structure procurement organisations.

Yet if take this scenario to its logical conclusion and extreme, it's clear that the procurement organization of the future will need to have an even greater capability to execute at the fringes of its influence and governance.…  In the future, if a procurement scenario of extreme decentralization and localization does occur, I suspect we'll see an increasing emphasis on centralized, platform-based technology decisions that help guide and implement policy, albeit with the capability of configuring specific capabilities on a regional or local basis...

More controversially, Jason also says, "the era of a common, global deployment of an SAP SRM, Ariba Buyer or Oracle iProcurement platform will likely go the way of the dinosaurs”.

And, “centralized procurement is likely to become a shared service for technology, skills (e.g., category management, commodity management) and risk management rather than a group that places first emphasis on taking responsibility for hitting a year-over-year savings number”

My view - I think we will see some moves in this direction althought I'm not sure we'll get to an "extreme " point as soon as 2012. But thought provoking stuff – read it all here.

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