What Is Value in Procurement? — A University Lecturer’s View (Part 3)

Concluding her 'Value in Procurement,' series, Dr Jo Meehan, senior lecturer in strategic purchasing at the University of Liverpool Management School, talks about procurement maturity and how that relates to value. You can read the other parts here, here, here, and here

How mature is Procurement?

I have been leading a range of research projects over the past two years across a number of sectors, all looking at procurement maturity. It’s a topic that is getting a lot of international coverage, particularly at conferences and events. Despite some very interesting, challenging work going on throughout the globe, as a profession I still question whether we are asking the right questions about what procurement maturity really is.

Common themes coming out of the research are familiar to many - the need for value rather than cost orientations, the importance of collaborative networks, the rise of risk management and data analytics, the significance of contract management and how and when horizon scanning can be translated into positive change.

All good stuff I’m sure most would agree, but do any of these practices really make procurement mature? Many have been around for decades, albeit with different technologies and terminologies, but in principle the contribution of procurement has arguably been fairly static: cost management, value-for-money, stabilise the supply base.

This lack of development is partially owing to our aspirations around the procurement function. The most over-used word in organisations is ‘strategic’ – indeed, the traditional, linear journey of procurement stated in nearly every textbook is broadly from clerical support, through commercial activities to strategic roles. “Strategic procurement” is seen as our nirvana and end point. We package our goal as “get involved early in board-level decisions and we have achieved success”.

The danger is that we conflate strategy with success. After all, what’s wrong with tactical and operational? Consequences on staff, suppliers, markets, economies, people and the natural world can be, and often are, overlooked in the bigger picture – yet this operational environment is where relationships, outcomes and value can be gained or destroyed. It is also where people ultimately judge our contribution and value.

The most effective organisations that I’ve come into contact with throughout my research seem to take a different approach to purchasing, something I’ll be discussing at procurement event PfH Live later this month. Yes, they do some of the strategic work but they have a good sense of the operational impacts internally and externally. To do this they need to be positioned for influence in the organisation, and respected for the value they provide.

This value is not just about the ability to write a commercially astute sourcing strategy or risk-mitigation plan. To a large extent, our internal colleagues should expect this as business as usual. The true value is in understanding the implications and consequences (intended and unintended) of our bigger picture. Who wins and who loses? Over what timeframe? Are there better, more equitable, sustainable choices we can make? These organisations dare to ask ‘So what if ... ?”

Tellingly, I’ve found that in those businesses where procurement is truly valued there is also a maturity of approach rather than purely a desire to be involved in strategic activities.

Procurement maturity is subtlety different from strategic procurement. Maturity recognises the tensions between strategic aspiration and operational abilities.  Maturity suggests a balance of learned wisdom and an openness to learn new things as the world changes. Recognising the limits to our knowledge is as valuable as knowing the answers. It can equally focus on the small areas as much as the million dollar deals.

A mature procurement function provides challenge and leadership, not just policing and implementation of corporate aims. Maturity in commercial skill and knowledge allows procurement professionals to suggest new, sometimes radical, ways of ‘doing business’. Integral to this is how organisations learn from experience and learn from others.

Mature procurement is arguably a more important aspiration than strategic procurement. Maturity will enable the procurement department to deal with the answers they get if the ‘so what if ... ?’ questions get asked. A purely strategic function might not risk asking these questions in the first place and if they do, it’s likely they won’t have the flexibility, self-awareness or wisdom to deal with the answers.

The push for strategic involvement is often driven by the desire of procurement teams. They want to be more powerful by being at the centre of corporate activity.  Maturity on the other hand is less ego-centric. It respects the impact and value that other teams and employees – particularly those who are less powerful - can have on commercial decisions. Equally, procurement maturity strives to ensure each of these teams and employees is accountable for their decisions and influence.

Having spoken to hundreds of businesses and public bodies about their maturity, it’s clear that many don’t have a firm grip on what truly mature procurement looks like. Confusing strategy with maturity is commonplace and unhelpful and it’s only when organisations rectify this misunderstanding that their purchasing teams will reach the true procurement nirvana!

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Dr Jo Meehan is senior lecturer in strategic purchasing at the University of Liverpool Management School. She will be presenting and chairing discussions about procurement in the social housing sector at PfH Live in Manchester on 29 June. 

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