Procurement In 2020 – As Predicted in 2011 (Part 2)

Here is another one of our summer “blasts from the past”, this one from May 2011. We think it’s interesting to see how this “vision of procurement in 2020” report, written in 2011, looks as we’re now not that far away – just another 28 months!

The Ariba “Vision 2020” report looks at the future of procurement 10 years on.  Today we’ll look at what it has to say about the role and future of procurement , including outsourcing and related issues.

There is general agreement in the report that the split of responsibilities between procurement functions / professionals and end users (budget holders)will fundamentally change over the next 10 years. And one predicted result is that the function will shrink in terms of direct headcount - at the more extreme end of the predictions, it may go altogether.

"End users will execute their own bids. Procurement’s role will be to set the automation engines up, then monitor and manage to make sure they continue to run.”

“The spend management function will be very small by 2020”

"Functional procurement is something that should disappear by 2020 ..  However, enterprises will need to think very carefully and thoroughly about how to embed the disciplines of procurement into business processes..”

Or maybe rather than disappearing, procurement will become somehow re-defined .

One outcome of the emerging 2020 vision is that the functional 'procurement' label fades from the corporate lexicon over the coming decade. "My personal point of view,” says AXA's Dr. Heinz Schaeffer, "is that procurement will no longer be called procurement in 2020."

At the same time, there’s a view in the report that procurement outsourcing is going to increase significantly.

Donald Ferguson, Head of Procurement Operational Excellence at AstraZeneca, suggests that, "By 2020, procurement of the more traditional commodity, leverage-type categories will exit the company and be sourced by people who specialize in sourcing them. The skills that go outside will be around creation of standards, specifications, performance management, and cost reduction. The skills we retain will be more focused around strategic influence and business acumen."

So what do we think? Procurement disappearing? Or becoming a radically different function?

I’m not sure – there seem to be a few contradictions here. I can see what Ferguson is saying, but if you’re relying purely on ‘strategic influence and business acumen’, then my fear is that procurement will disappear, because other business and functional leaders will see that as very much part of their role. Procurement has to carve out a role that is more than that, but fortunately I think we can.

It’s not that I disagree with much of the above. It’s more that it seems to miss some key responsibilities that will I believe still sit within our area, because I can’t see who else would or could take then on. For instance, a key role for the procurement senior team will to work out the best blend of internal and external procurement service provision (outsourcing) to provide the optimal balance that delivers value.  That probably will include more outsourcing then we currently see – but that will be carefully selected elements of the overall workload, not the whole lot.  And someone of course has to manage the outsourced service providers.

Similarly, I have no doubt we will see budget holders and line management take on more of the work we might define as procurement, aided by better and easier to use technology.  But again, someone has to define and manage the overall P2P and Sourcing processes. Someone has to make sure the budget holders have the right commercial skills.  I’d suggest that there are elements of sourcing that require deep expertise – even if there is more automation – and budget holders won’t have the time or inclination to develop that themselves.

There’s a spend governance role as well; and I can’t see how an organisation can get the best results without strong management of suppliers and categories that cut across multiple budget holders. Someone has to look at the organisational big picture.

So all of that seems to define a pretty meaty role still for “procurement”.  Yes, less day-to-day, low-value processing or even contracting work; but the Vision 2020 report, while thought provoking, does seem off-beam here. As someone once (might have) said:

“The reports of procurement’s death have been greatly exaggerated”!

 

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