CIPS 80:20 Vision – the future of Procurement?

We mentioned the CIPS 80:20 vision report recently in the context of an apparent mismatch between the introduction written by CIPS Chief Executive, David Noble, and the body of the report. But today we’ll get into the meat of the document, as the contributors look ahead to the future of procurement.

There’s some good stuff here but the format is a little confusing, as we have six “key findings” or predictions that form the Executive Summary, then six short chapters that don’t map one to one to the “findings”. For the purposes of our analysis, we’ll concentrate on the findings section, with maybe the odd reference to the subsequent chapters. We’ll take a look at three of those findings today and three in part 2. We’ll quote from the 80:20 document than give our commentary on each.

1.An evolution in professional procurement, where spend management shrinks and organisations move away from large, discrete, enterprise-level organisations dedicated to doing their procurement. The profession will focus on profits rather than cost-savings….. We will say goodbye to the backroom boys – the people who excel at sourcing (processes) or are big-time users of procurement and sourcing automation technologies. They will find themselves working for third-party services firms – or not at all. We will see the growth of loose networks rather than the tight functions we are used to – networks of supplier-facing professionals embedded into strategic business units, constantly reinventing their roles as business needs shift”.

Spend Matters says - So procurement becoming less of a centralised function and more outsourcing – I think I’d agree with both of those but we’ll see in a moment that there are some contradictory arguments around that prediction. And I’d love to see us focusing on profits rather than cost savings…

2. “The emergence of a new supply management, in which many of the current procurement and sourcing activities (the ones that do not get redistributed to internal end-users), will be outsourced over the next decades. The service providers will call the shots as demand for procurement outsourcing increases and the quantity and quality of third-party procurement services will increase dramatically, surpassing what can be achieved in-house. The strategic scope of the profession will widen too as we develop an understanding of the value-adding capability of procurement. This enhanced scope will cause procurement to become increasingly linked to financial supply chains, optimising cash flow and working capital, implementing dynamic discounting and supply-chain financing”.

Spend Matters says - I’d take issue with a couple of points here. “Service providers calling the shots” assumes that as the demand for procurement outsourcing increases, the supply won’t – clearly not true.  Then there seems to be a fundamental paradox here. If procurement is increasingly outsourced, then how is it to develop these value-adding capabilities that surely require close strategic integration with the wider organisation? It must be difficult to achieve that with an outsourced procurement operation surely? I’m with the authors on the opportunities within the “financial supply chain” though.

3. “Global businesses will enter a new era of decision-making – instantaneous business intelligence is not far away. The ability to gather, store, access and analyse data has grown exponentially over the past decades. Big-data analysis will make market pricing for goods and services much more transparent – via e-sourcing, global trading networks, online communities and procurement’s scrutiny into categories that are currently cloaked. Could negotiation become a lost art? As our awareness of supply-related risk comes into sharper focus, we will see consensus develop around how to measure risk via standardised, readily available third-party information and via networked communities where people pool data for operational risk assessment. ….. With this will come full visibility regarding spend, risk and performance, providing ready access to accurate, timely, structured, internal and external business intelligence. This will create unprecedented capacity in support of decision-making”.

Spend Matters says - Good stuff! I’m in agreement with virtually all of this and it seems to be pretty much guaranteed to happen. The point about negotiation is an interesting one. I suspect there is less now than there was 20 years ago because of e-sourcing, reverse auctions and other advances, and that trend may continue as more transparency reduces the need for negotiation in many spend areas – but not all. I can’t see professional services contracting ever becoming totally “transparent” for instance – negotiation is not going away in that category. And it will still be needed in the post-contracting phase in many cases, when we’re talking about getting the most out of our contracts and suppliers. Persuasion and negotiation skills will still be evident there.

Part 2 to follow....

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