Jason Busch Scenario 2 – Beyond process: politics, regulation, philosophy and economics define procurement’s focus

We’re featuring Jason Busch and his five scenarios for procurement over the next decade – and today we have this.

Scenario Two: Beyond process: politics, regulation, philosophy and economics define procurement's focus

We urge you to read Jason’s full piece here, but this scenario resonates with the concept we introduced recently – that of Procurement Activism. As times get tougher in many countries, recoveries that are jobless if they exist at all, what can procurement do to help – and what will governments expect and want to do with their procurement spend to drive agendas beyond simple value for money? Then there are all the regulations that we’re expected to follow; here’s Jason:

Aside from European uncertainty and broader market volatility, regulations and supply chain traceability increasingly rule the day. Consider just the cost and effort involved in keeping track of supplier practices for Dodd-Frank (conflict minerals), EU RoHS/WEEE, EU RoHS version 2, China RoHS, California RoHS, EU REACH and the Toxic Substances Control Act -- just to name a small subset of the regulatory drivers impacting procurement.

Then for private and public sector organisations, there are local industry regulation, workforce expectations and codes of practice to further add to the procurement workload in terms of managing compliance. That’s not to mention the battle for control of raw materials such rare earth metals, supply chain disruption caused by terrorism or even the “occupy” type protest. The task for procurement is moving well beyond simple savings, and as Jason says, “how much will be able to focus on cost reduction and proactive risk reduction going forward when we're up to our shoulders in reacting to economic meltdowns and environmental/CSR related supply chain compliance”?

It strikes me that this scenario is pretty much a given – it’s hard to see life getting simpler in terms of all these externals risks. These issues won’t of course impact every procurement person in every organisation, and few will be affected by every one of them. But it hard to think of an organisation (or procurement role) of any real size or scope that won’t be touched by some of these events and factors. And that means procurement people and functions developing some new ways of thinking and acting, and new skills to cope with this.

We’ll leave you with Jason’s brilliant summary.

 I believe that it's possible to logically argue that politics, regulation, philosophy and economics are defining procurement's focus. From reacting to commodity market swings (resulting from China-led, i.e., Chinese government-led demand) to providing greater liquidity to suppliers and supply chain partners that are finding it hard to tap banks lines of credit in Europe, procurement is already prioritizing initiatives which are not of their own doing -- or that of shareholders. Rather, this scenario presents procurement in a constant state of triage, forcefully defending the main castle gates between the organization and the outside world as economics, government and foreign affairs batter up against corporate defenses -- and the occasional offensive push when strategy allows.

In this scenario, I believe that supply chain intelligence, market insight and the ability to accurately plan and forecast take on multiple orders of priority over tactical compliance and process applications (e.g., eProcurement, e-sourcing, etc.). Put another way, this is a world ruled by the next instantiation of solutions like Bloomberg, SAP Supplier InfoNet and the like -- not Ariba Buyer or ERP eProcurement. Supply risk insurance products and the underwriting of risk take on new dimensions here as well. Understand networked intelligence and risk as a currency and you'll thrive (or at least survive) in this context. If you justify your existence just on cost savings, look for a new job. Now.

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