Happy New Year – and is a change of focus required from procurement in 2014?

Happy New Year! And as we get used to writing or typing 2014 instead of 2013, the economic outlook in much of the world anyway looks brighter than we expected for much of last year. The UK and the US are tipped to be the fastest growing countries of the leading western nations, helping increase the global economic prospects.

However, positive though that seems, it brings challenges for procurement people, teams and organisations as well.  In many organisations, procurement comes into its own when times are tough. CPOs actually get excited when the cry goes out from the Boardroom, “we need to save money”!

But the last few months have seen – in some countries at least – a strengthening economic recovery, driven perhaps by what the economist John Maynard Keynes called the ‘animal spirits’. That is the  ‘spontaneous optimism’, driven by a natural desire of the human race to better itself, to look for new and better ways of doing things, to invest and create wealth. It may be that senior executives who have been waiting for some years to invest significant cash reserves have got sick of waiting for something external to happen and have simply decided to get on with it.

So if those spirits are returning, then we will need to see a different approach from many procurement executives and functions compared to that which has been appropriate over recent years.

If the focus of the Board is switching to expansion, to mergers and acquisitions, to new product development, or moves into new markets and geographies, then procurement needs to respond appropriately or it will be left behind and lose relevance and credibility in the organisation. Talking about cutting another few percent of the cost of stationery, or tightening up the travel budget again, just won’t cut it when the CEO and CFO are mentally preparing for that new joint venture and product launch in Vietnam, or looking at whether to build the new plant in Mexico or Poland.

How can procurement help to drive that growth agenda? That’s one of our hot topics for 2014, but we’ll leave it for now and simply suggest that the first priority is to understand your organisation’s objectives, and then to prepare mentally (if that is appropriate) for the move from a cost-focused to a growth focused approach.

Anyway, let’s hope that positive sprit hangs on through 2014. Happy New Year!

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Voices (2)

  1. Mary Wildsmith:

    I agree with the observation about Local Authority spend – Council Tax is paid by the public from their post-tax income and the economic recovery is not yet matched by rises in salaries for most people. This means that the pressure to save money for residents is still key. More value is being delivered also by an increasing focus on Supplier Management throughout the life of the contract.

  2. Ian R:

    Happy New Year Peter. You may have slipped this article out when everyone is just getting used to waking up at 6am but it is a crucial point you make and I hope it continues to feature in your topics for focus in 2014.

    Even in the austere world of local government I have started to see more interest in capital spending for 2014, as bodies have realised you can’t put investment off forever. However, the primary focus for us is to ensure we carefully manage how these projects are procured and the money is spent, difficult when everyone is now keen to press the button after 5 years of cuts, efficiency drives and reduction.

    Procurement must be stronger in reminding stakeholders that we don’t just help save money, we help spend it more effeciively and deliver added value too. At the same time we are not out of the woods yet and need to continue to look at ways to deliver services smarter, and continue to build the profile of procurement.

    I’m sure some of this is relevant to the private sector also, as we need to ensure that what money is being spent on growth, investment etc doesn’t take us back to where we were in 2007, and delivers on every £ spent..

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