The Future of Procurement – “Source Code for Survival”

(We welcome this thought-provoking post from Dr. Richard Russill, author, mentor, educator and all-round  procurement guru!)

Poised? ... or Precarious? Take your choice as to which word describes procurement’s future. It’s worrying that the question has to be asked at all given that procurement has been poised for many years to make its breakthrough on the business scene but has met with only moderate success.

OK ... good things have happened. It’s not that long ago when a Google search for ‘CPOs’ would come up with ‘Community Post Offices’ as the top result. Now Chief Procurement Officers do indeed get a deserved mention on page one and yet, of 278 CPOs recently polled, 99% said that their ‘function did not have a high enough profile within the organisation.’ Better education of top managers was offered as one solution, but it could be said that CPOs must get better at explaining themselves in the first place. Banning the ‘F’ word would be a start. Describing procurement as a ‘Function’ perpetuates the idea that it is a mechanistic by-product of corporate activity. In reality it is a fact of business life: if you’re in business then you’re in procurement. The question is not “should we give it more priority?’ but “how can we do it as well as possible?’

One enlightened CEO says: “business is basically simple: we buy things, we transform them and we sell things ... and we have to be equally good at all of that to succeed as a business.” Unfortunately that joined-up view of things is rare ... amongst CPOs as well as their bosses. If procurement is not understood to be a primary driving force of business then minimising money (albeit seeking maximum value for it) is all that remains as its raison d’etre. And justifying one’s existence by cranking out cost reductions loses all credibility when the savings gravy-train runs out of steam.

Recent research into artificial intelligence reveals more about procurement’s mechanistic public image. 366 jobs were ranked according to the probability of their being taken over by a robot. If you are a shelf filler or a bus driver, then ... relax. The survey says that the buyer’s job will be axed before yours is. The only good news is that the safest job is being manager of a pub. What’s missing in this research is any understanding of those aspects of procurement’s work where human interactions are essential and cannot be replaced by algorithms. This covers internal and external relationships and behaviours, now and in future.

The latest round of Nobel Prize awards saw two economists recognised for their work on the theory of contracts. Whilst not specifically related to procurement the key issue is still relevant: that when people want to work together, individual self-interest must be kept under control. This requires some sort of agreement between the parties concerned, but it is not possible to write contracts which cover all future situations. The problem of working with a degree of uncertainty is only solved if human interactions take place, appropriate to the moments when ‘unforeseens’ manifest themselves. Managing all these ‘human moments’ is a lot more challenging than placing orders and will be increasingly vital for survival in a rapidly changing world where the tectonic plates underpinning established practice (and maybe even law and order) move and fracture with increasing frequency and impact.

Recent national elections and referenda, and the public’s reactions to them, demonstrate that predicting the future is a risky business. The next best thing is to excel at dealing with whatever the future throws at you. This ability to ‘handle the unexpected’ will distinguish winners from losers in the future, and the DNA of high-performance procurement contains the necessary source code. Procurement knows how to play a direct role in propelling a company towards profitable survival in uncertain times ... but will only succeed if it is poised for that role and articulates it in a compelling way. It’s either that, or to let procurement’s fortunes freeze in functional permafrost as artificial intelligence takes over.

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