The outlook for procurement in 2011 (part 2): the glass half empty

We looked yesterday at what we might describe as the 'glass half full' outlook for 2011 from a procurement perspective. Let's speculate today about the other side of things; how might 2011 NOT work out so well?  Like this perhaps...

It becomes clear early in 2011 that inflation isn't going away, as oil, wheat and metals prices hit all time highs.  Suspicion grows in countries like the UK that the Government isn't averse to a bit of debt-shrinking inflation, and unrest spreads as those in work strike for higher wages on the back of 5% inflation figures.  Bond prices crash in Europe and the US on the fear of inflation, bringing another round of banking crises.  Meanwhile riots in major European cities, led by those without work, from London to Athens, are driven by the cuts in public sector spend beginning to really bite.  Along with strikes in critical areas, this affects supply chains and exposes firms that haven't made contingency plans.

Organisations become increasingly cynical about the value of procurement functions, who seem unable to do much about rising prices caused by strikes, China cornering the market in some scarce commodities, and high demand in the developing world.  Meanwhile, the procurement savings being claimed in the public sector prove hard to demonstrate, and staff cutbacks strip the sector of many of its most talented staff.  A vicious circle ensues in the UK public sector in particular in areas such as defence and health, with declining performance driven by staff leaving, which makes more good people want to go, which hits performance further...  and so on.

Many organisations see that their supply chain risk activities are totally inadequate.  After another round of volcanoes and extreme weather (to go with the strikes and riots), CFOs decide that this whole subject is too important to be left to procurement, and take ownership of these activities themselves.   CFO's then start questioning the value of other procurement activities; 'supplier relationship management' programmes are the next to be slashed.

Meanwhile, the growth in low cost 'cloud computing', including user-friendly supplier network platforms offering B2B 'Amazon equivalents',  leads many organisations to question whether they need a substantial procurement function at all.  Line managers can use automated sourcing and transactional platforms to 'do it themselves' more quickly, easily and with at least equivalent pricing to that achieved with procurement help.  Procurement functions are downsized and remaining staff farmed out to line management or other functions.

Looking back, it becomes clear that 2010 was the high-water mark for procurement in terms of the size, strength and importance of the 'profession'.  And 2011 is notable in historical terms for the acceleration in the transfer of economic power from Europe and the US to India, China and South America...

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