Value Procurement – is this the next big thing? Bill Young and the issues with Category Management

In our coverage of the recent ProcureCon Indirect event, we commented on the “confusion”, or at very least lack of consistency of approach, shown by different presentations given at the conference.

Some fundamental questions suggested themselves.  Is category management being superseded by more business-focused procurement strategies? Is the role of procurement purely to support the business or is there more to it that that?

Coincidentally, just as these debates were going on, Bill Young wrote an excellent piece for the Procurement Leaders website. It’s very thought provoking and picks up on some of those points exactly.  (Young was a senior procurement person in the Pharma industry and now runs a sales and consulting business, Kestrel-OPS,  as well as writing extensively on those matters).

Young starts by claiming that procurement has “slipped down the agenda” again, now most organisations have pulled out of the 2008 financial crisis. He suggests that this might indicate a fundamental change – could it be “no less than the end of category management”?  As a process and a concept, it raised the profile of procurement, he agrees, but there is a fundamental flaw.

“Procurement’s business clients do not have cost reduction as their primary aim. Procurement does; and has to go through unnatural contortions to reconcile this mismatch of objectives”.

He also identifies an area of conflict. We may talk about aligning with the business, but the CEO and the CFO may see themselves as the true clients of procurement, with us in more of that “policeman”, cost reduction role.  That in itself can leads to conflict with budget holders, and given that business functions are also realising the importance of procurement, they are therefore increasingly likely to take back those procurement responsibilities and invest in resources themselves. IT recruit “vendor managers”, for instance, to work within their own teams.

One consequence Young sees is the rise of what he calls “Value Procurement”, with savings playing a “smaller role in the reporting dashboard”.  And has procurement itself peaked, he asks?

It will continue to be important but we could be seeing the end of a one size fits all approach to strategy. Procurement and its clients admit that the pile-‘em-high-and-buy-’em-cheap approach doesn’t work well with critical supplies. We are going to hear a lot about Value Procurement in the coming year”.

 Do read the whole article – it is well worth it.

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