Trends to look out for in 2013 – Part 2, Procurement Developments

We looked yesterday at some of the big economic issues for 2013. Today, let’s consider more specific procurement trends.

There are a number of topics close to my heart that I hope will get higher profile during 2013. One is the measurement of procurement performance and savings. As “big data” allows the Board to understand more and more about their business, their customers and markets, it seems inevitable that they will also want to understand more about their supply base, and the performance of the organisation in managing it. That means focus and pressure on procurement leadership to demonstrate the benefits they are delivering.  Those who can’t do that, run the risk of not surviving 2013, putting it bluntly.

In terms of organisational models for procurement (another long-standing pet subject for me), the centralise / de-centralise pendulum will keep swinging in terms of structuring procurement resource and manpower. My perception is that we’re going to see the general trend being towards de-centralising procurement, but with organisations using technology better to have visibility over the big spend picture, without that necessarily meaning a large central procurement function.

I know of one FTSE 30 company that has recently dispensed with their central CPO post, but is keeping a small team at the centre to manage data, reporting and communications around the devolved procurement network. That may become a trend – not a bad development in itself, but slightly worrying perhaps for the CPO and aspiring CPO population.

Whilst devolution of procurement to expert teams who are closer to the business may have some benefits, there are fundamental and real risks to the position and role of procurement in many organisations. The big risk is that business units or other functions will take more ownership of “their” procurement . They will recognise its importance, but decide that, with the help of more user-friendly technology, they can do it themselves without needing a specialist procurement function to support them.

There are parallels with the dilemma many IT functions now find themselves in – if users can buy pay as you go, cloud based services, why do they need large, bureaucratic corporate IT functions and large monolithic systems? Procurement maybe isn’t quite as vulnerable, but the warning signs are there.

In order to counter that, procurement will have to focus harder on both the deep expert skills that we (should) have, and at getting better at stakeholder management and engagement. Expect to see more training and development resource going into what we might call “soft skills with a hard edge” – persuasion, internal negotiation – and into project management skills. I’d hope this will be better targeted than many historic development programmes , with organisations assessing the skills and competence of individuals in procurement, looking at the whole range of behavioural and technical skills.

And other longer-term trends in the procurement world will continue – more focus on both Supplier Relationship Management and Supply Chain Risk, without any real step changes in capability or understanding. We should see a continuation of the steady but painfully slow progress we’ve seen in these areas, helped by more technology and solutions being offered by providers in both of these sectors.

And tomorrow we’ll look at the prospects for technology, and solutions in the procurement arena.

Voices (3)

  1. RJ:

    Blimey, Peter, didn’t expect you to be so downbeat on us all!

    With the UK and European economies still bumping along the bottom surely this should be the prime time for Procurement to be taking a lead in driving business performance improvement.

    Having said that, I do concur with much of your vision. In particular, I totally agree that measuring procurement performance is critical and that the benefits of real Strategic Relationship Management (please, let’s take the “supplier” tag out of SRM!) and effective Risk Management are rarely understood by buyers and our clients alike. So, yes, let’s kick ourselves in the backside and work on these areas.

    Some other positive trends for the profession I see coming out of difficult times are:
    – the continued growth in opportunities to extend the remit beyond the traditional and direct spend. Professional and financial services and outsourced contracts have both been big themes in 2012 and there will be others that crop up in 2013. Some skills enhancement and certainly market knowledge is needed for most Procurement teams to support these new areas but that challenge should be a cause for excitement
    – Procurement’s penetration into new markets: retail organisations waking up to the fact that their fantastic “goods for resale” skills can be applied to other areas of the business, SMEs recognising the value of managing their cost base, legal firms noticing that lawyers don’t earn any revenue while negotiating their firm’s temporary labour contracts: these are all things I encountered in 2012 and which will continue through 2013
    – procurement outsourcing (in which I declare my vested interest): maybe not a positive trend for some CPOs/senior managers who feel threatened by it but a great opportunity for individuals’ career development and a good way for many firms to tackle difficult markets, “tail spend”, the centralise/de-centralise cycle etc
    – oh, and finally, I’m surprised you didn’t trumpet your own “Market-informed Sourcing” again: like SRM it’s a big challenge but maybe 2013 will start to see some successes creeping into the public domain and, like you, I think it could be the next wave on, or at least a complement to, category management thinking

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