Our Procurement Wishes for 2015 – Part 1

We said at the beginning of the month that we weren’t going to make predictions for 2015, based on the clear evidence that predictions are worse than useless. However, we’re going to cheat a little bit and give you our four wishes for 2015. Now they are not predictions, in part because I’m not sure they will come to pass. But most predictions are arguably wishes – they are whatever the writer really wants or hopes to happen, so I suppose we’re not too different really. Anyway, we will have two wishes today and two to follow.

1. We wish the procurement industry would make a concerted effort to move away from “savings” as the primary indicator and measure of success

We’re not naive enough to assume that we can totally lose “savings” as an important measure. For some of the goods and services we buy, unit cost reduction is an important target. But for what percentage of the total spend of our organisation is it really the main driver?

Whatever your current prices, I guarantee that I could find you cheaper IT equipment or services; cheaper packaging or raw materials; cheaper management consultants or advertising agencies. But what will buying those cheaper products do for your customer perception, your sales and ultimately your shareholder value? We all know this is the case, we all know it is value that matters, not savings. Yet so much of the focus in the profession is still about cost reduction and savings. Which we don’t’ even measure properly, in the vast majority of organisations anyway (watch out for more from our friends at Sievo to come on this issue soon).

You can download this paper "Three Occasions When Procurement Should Spend More" too if you need more persuading. But we need a concerted effort from practitioners, solution providers, consultants, educators, even Institutes, to make it clear that “savings” is NOT principally what procurement is all about.

2. We wish that procurement would start to be associated with more good news stories and fewer bad

This is linked in some sense to that last point, but it has started worrying me that more and more people I meet from outside our industry/profession, see procurement or purchasing as “bad guys” (or girls), perceiving that we are responsible for many of the anti-business stories they read in the press.

So supermarkets screwing rebates and discounts out of their suppliers, or putting poor dairy farmers out of business? That’s the buyers' fault. Premier Foods asking suppliers to pay up just for the chance to win their work? Obviously procurement leading that one. Workers in Qatar dying on the World Cup construction sites? Rapacious purchasing managers in the lead contractor firms driving down prices through the supply chain. Factories collapsing in Bangladesh? Well, as we know from our own CIPS Dinner last year, that’s our fault as procurement professionals. Then there is "modern slavery," our fault because we don’t know or care what is going on in our supply chains.

We’ve talked a lot about attracting bright young people into procurement, but right now, there is a lot around that would put most nice people off coming into the profession! I’m not sure what the answer is – more effort at finding and publicising good news stories certainly, but perhaps also two other things.

One, that we simply stop doing really stupid stuff (see Tesco or Premier as examples) – I know that is tough for the procurement people being put in difficult positions in those firms, but some more assistance and pressure from within the profession might help them resist the more extreme demands from their bosses. And secondly, we should get on the front foot where the criticism is undeserved and explain what is being done, for example where big firms and procurement teams are working to improve workers’ conditions in developing countries.

More on this to come here as well through 2015, as it is an increasingly important issue for us. And two more 2015 “wishes” tomorrow.

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