Friday Rant: Is Europe Ahead of the US in Procurement?

It's been a whirlwind week for me in the UK. After spending two days at IBX's Purchasing Executive Summit in Oxford and giving the opening keynote address (stayed tuned for a number of posts next week on the event), I headed to London to catch up with a number of colleagues and friends from various firms. The trip has reinforced an idea that I've been thinking about for quite some time. And that's my belief that in contrast to most areas in the enterprise where Europe is years behind the US, I'm beginning to feel that they're actually ahead in at least some areas of procurement in terms of adoption and philosophy. In contrast, the usual equation suggests the UK is a year +/- behind the US when it comes to technology and process excellence and the continent is another year or two slower than the UK to adapt to new changes. Whether or not this is true as a rule, I can't say with near certainty. But when it comes to procurement, it's most certainly false. In fact, I think there are a handful of areas where large European companies are actually ahead of their North American counterparts in procurement and supply chain.

The first area is cross-border physical and financial transactions. Because Europeans have had a long history of trade, they're inherently more familiar with what it takes to source in a multi-country environment. And as a result of regulation within the EU, many companies are that much more sophisticated when it comes to both local and cross-border invoicing and payment mechanisms than in the US. While many of the most successful eProcurement implementations are no doubt in North America, I'd wager that the majority of the most successful large invoice automation and payment implementations are in Europe (not to mention a good many successful but broader P2P initiatives as well, such as Lufthansa's, which I learned about at the IBX event).

Supplier information management is the second area where I sense Europe is ahead, both offline and online. Because of a longer history of CSR initiatives and the general need to keep track of suppliers outside of country borders, many European companies appear further along as a rule than those in North America when it comes to managing supplier information (included but not limited to performance, quality, and CSR data). Granted, I'd argue US companies are a bit ahead on the risk side at this point, but I suspect European procurement organizations will rapidly catch up here as well, integrating such efforts into broader approaches to gather, maintain and proactively manage supplier information.

The third area where Europe feels ahead to me is in public sector procurement, at least in the UK. Now, I have nothing against the fine ladies and gents running our Federal procurement efforts in Washington, but candidly, the folks in the UK seem further along by years in every area, from sourcing and negotiation (reverse auctions, optimization, etc.) to realized savings and supplier management, at least from high profile initiatives. I had a hard time accepting this at first because its not supposed to be this way. After all, the UK has perhaps the worst reputation for government bureaucracy of any country throughout history (India can thank the Brits for holding them back for decades by leaving behind their bureaucratic legacy). But it's really true -- UK public sector procurement feels years beyond where the US needs to go, let alone where it is today.

The fourth and final area where European procurement appears more advanced is more subjective. And that's overall philosophy and the non-technical side of supplier relationship management. So many industries and companies in the US have developed an absolutely wretched reputation for mistreating suppliers over the years. And yes, these types of organizations exist in Europe as well. But there's something about Europe that just feels more civil to me when it comes to building collaborative buyer/supplier dealings. After all, in the US, we often negotiate and plan with suppliers while heavily caffeinated over the phone. But in Europe, the business lunch (and dinner) replete with wine and a slower pace of life is still alive and well. And this, I'd argue -- despite my sourcing and reverse auction training -- can go a long way to establish and build the types of supplier relationships we need over the long term.

- Jason Busch

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