Procurement activity has peaked in developed economies (part 3)

- November 26, 2012 11:37 AM
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If you remember, we explained in the first part of this series why the growth in outsourcing and vertical “dis-integration” of supply chains over the last 40 years has led to a multiplier effect in terms of the procurement workload through the supply chain. That in turn has driven the impressive growth of the procurement profession and associated industries.

In part 2, we argued that organisations may have gone pretty much as far as they can and we might see work coming back in house, which would inexorably lead to a decline in the number of procurement people. And this was how we finished part 2.

“But, I hear you say, there are still many category spend areas that procurement don’t influence within organisations. Won’t that be our major source of growth over the next 10 years, as we continue our push to increase our traction over non-traditional and indirect areas?”

Well, it might. I’m not claiming absolute certainty here. But there are three reasons why this may not be enough to save us from a decline in “professional” numbers.

Firstly, given we see so many examples of bad procurement practice in these areas, it is by no means a given that more and more organisations will entrust their marketing, professional services or FM spend to procurement professionals . Now this at least is somewhat within our own control – the better we can get at this as a profession, the more chance we have of continuing the land-grab we’ve made over the last 20 years.

But (point 2), I’m also seeing some signs that organisations, whilst recognising the importance of good procurement activities, don’t necessarily see that sitting in a procurement function. So talking to people from a large Financial Services firm recently, they told me that the IT Procurement people (for instance) were now sitting in the IT function. “With at least a dotted line to the central Procurement team”,  I asked. No, the central team and Procurement Director were gone.

So under this case, procurement activity might grow, but with people executing it who will not necessarily see themselves as core members of “our” profession.

And finally, outsourcing. Pure coincidence that we got a comment on part 2 from Ed Cross, who runs Xchanging Procurement Services, a very significant global player in that field. He pointed out that organisations are still finding new areas to outsource, such as procurement itself, so if that continues it would lead to more work for procurement. I don’t disagree, and no doubt new spend categories will emerge. However, he’s highlighted another aspect, which is outsourcing of procurement itself– my third point.

If we see more of that, particularly in the indirect spend areas, which I believe we will, there must be some consequent economies of scale. One assumes that the outsourcers will be able to serve multiple clients with fewer professional staff in total than if each client did it themselves. So whilst there may still be a contract / supplier management role (the intelligent customer) remaining on the client side, the net effect will be a decline in professional numbers.

Now, as I say, this is all just speculation and hypothesis. But as we approach the end of another year, it’s good to look critically at where procurement sits. Most of what you read from folk with a vested interest  – CIPS, consulting firms or whatever – paints a not altogether unexpected picture of the profession as a roaring success, which arguably it has been for the last 20 years or more. But let’s just be aware that past success doesn’t necessarily mean things will continue like that forever.

And that in turn should make us keener than ever to get better at what we do.

 

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Comments

  • Mark Hubbard:

    Interesting analysis; I suspect I have a more positive view that the overview expressed here. The challenge I see is actually about the quality of the procurement activity which is being done in the time available; there is still so much which is rushed and leaves opportunity on the table, largely due to time constraints in organisations. Where spend analysis,systems, sourcing, contracting and performance management is embedded and done well, then there will be time to think about a change of direction; still lots to play for at the moment.

  • The Finance & Accounting Weekly Roundup: December 10thSutherland Global Migration:

    […] • Procurement activity has peaked in developed economies (part 3) […]

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