The Fifth Age of Procurement – Wider Value (part 2)

In part 1, Peter Smith talked about the fifth age of procurement – the theme of his keynote at riskmethods  Supply Chain Risk Management Summit.  

The fifth age of procurement focuses on how we will deliver “wider value” by supporting our organisations as they seek to show “purpose” above and beyond basic bottom-line performance. This change in focus is being driven by customers, citizens, government, regulators and our own staff, all of whom will increasingly demand that organisations think about more than their own narrow performance.

But if we are going to be working with our suppliers and supply chains / networks to address these difficult issues around climate change, plastics, de-forestation, modern slavery and more, we need to have well-thought-out plans and strategies, at an organisational level and within procurement. We will have to focus on where we can have a real impact and (to be selfish) where our own customers or regulators want us to focus.

If you’re a soft drinks manufacturer, addressing plastic waste is going to be top of your list, not lobbying for better working conditions in the African mining industry. If you are a local council, social value in a tender will mean a focus on supporting local jobs or re-generation, rather than saving tigers in the rainforest.

For procurement teams, supporting their wider organisational goals, it’s clear that most initiatives will require us to work closely with suppliers. And as I said at the Supply Chain Risk Management Summit in Hamburg last week, “to do this, we need to understand our suppliers, the markets they are part of, and the environments they operate in.”

But my lightbulb moment as I wrote my presentation came at this point, because those are exactly the same requirements we have in terms of delivering traditional supply chain risk management! Whether we are looking at risk driven by weather conditions, supplier issues (financial, strikes, supply disruption etc), cyber attacks, or anything else, that understanding of suppliers and markets, and timely information about the environment they operate in (including risk alerts and the like), are vital.

There is an obvious overlap between “procurement with purpose” and risk management of course when we look at reputational risk. Many of those wider issues such as modern slavery or pollution are potential reputational risk areas for some firms. You don’t want to be identified as buying from factories where human rights are abused, or staff are physically at risk. But my argument here is that the alignment between risk management and procurement with purpose is much wider than just that reputational element. The information we need to deliver both risk management and procurement with purpose is identical really, which suggests that we might actually be looking at two sides of the same coin here.

I’m afraid that’s about as far as I have got with my thought process at the moment. I suspect this is heading towards a model for supplier management (and therefore procurement) that encompasses both traditional risk management thinking, the whole “purpose” agenda, and the seeking of positive opportunities for organisations through close working with suppliers and supply chains.

That isn’t revolutionary, but might be food for further thought in the profession. And to close with one piece of advice – don’t look on your supply chain risk management work, your SRM (supplier relationship management) work, and your “sustainable / purposeful procurement” initiatives as different silos. This is all part of a bigger, holistic picture; how we manage our own value (opportunities and risks) across the supply network, and contribute to that wider value imperative.

Peter's book - A Procurement Compendium - is a collection of short articles relating to procurement and supply chain management, and is now available to purchase here.

 

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