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This post series looks at how procurement can help tackle disruption. In the previous posts, I discussed the importance of updating strategies and the role of technologies. In this final post, I look at what skills and capabilities are needed in sourcing and procurement going forward.
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Strategic procurement requires a diverse skillset including analytical capabilities, subject matter expertise and negotiation skills. Reflecting on the recent developments with logistics chain disruption, raw material shortages and rising input prices, the quest for talent in procurement capable of thinking strategically and holistically remains as strong as ever. This means the ability to think and strategize in terms of the entire supply chain and moreover, the network. This may be challenging as traditionally, we tend to think of supply chains as linear, when in fact they are shaped as networks. The ability to model a network, identify the most important actors and the linkages in between and recognize the position of one’s own company is a must for developing strategies.
In this context, the ability to act quickly and swiftly can be highlighted as well. Accelerated procurement can be adopted for plan-to-strategy and for the follow-on processes. This could entail the ability to execute sourcing projects quickly and reduce the cycle-time in contracting. Technologies help in suggesting suitable suppliers and contents for the RFP and in scanning the supplier market for feasible candidates. Contracting cycle time could be reduced by utilising pre-approved templates, running price negotiations and redlining in parallel, utilising AI to assist in negotiations as well as electronic signatures. In procurement, repeat purchases could be automated, and fast, light-touch or no-touch procurement channels set for certain commodities to enable automated approvals, pre-filled POs and digital transactions. In the future, it is possible that companies will set two kinds of execution pathways in supply management and procurement - one that supports and enables projects with slower clock-speed, and another for fast-tracking. These processes require different profiles from people that are running them.
Risk management capabilities are critical going forward. At times of stability, this may not have been the focus area for skill and competence development in procurement teams. Yet, as geopolitical instability and disruption have peaked, analyzing and understanding risks, drivers and impact on the supply network, and planning mitigating actions have become new operational priorities. Managing risk is no longer an after-thought or an isolated activity, but a key consideration and an integrated part of all buy-side activities. Legislation including the German Supply Chain Act and the planned EU directive for corporate due diligence in sustainability will oblige companies to assess, mitigate, document and report on human rights and environmental risks in the company’s supply chain. To comply, companies need to implement various system and process changes to ensure that they
The “what” comes from legislation, it is the “how” companies struggle with, since the new requirements not only have an impact on systems and processes, but also on the expertise and capabilities that are needed to comply.
How can procurement become a function where people aspire to be in?
Traditionally, procurement has not been the first choice in terms of career development. When I was teaching at Aalto university and asked Master’s degree students if they considered a career in procurement, only a few hands (if any) would go up. When asking the same question in relation to sales, I would see a classroom full of raised hands!
The lack of enthusiasm for a career in procurement could reflect the general emphasis that media, corporate managers and industries have on demand-side dynamics and students picturing sell-side roles as more impactful than buy-side roles. But this does not have to be an either-or situation! For anyone working in sales, it’s vital to understand the professional buyer’s mindset and perspective. Equally, everyone working in procurement needs sales and persuasion skills, as without them, it is impossible to execute category strategies. Universities should offer a crash-course on procurement in sales and marketing classes, and vice versa, sales and marketing 101 should be included in purchasing and supply management studies. The same could be applied in the corporate setting as well. Why not have a joint training with sales and procurement teams ? This could work well for picking up a thing or two for those tough future negotiations that are undoubtedly ahead for both corporate sales people as well as for professional buyers.
********
Global volatility and resulting disruption challenge the established ways of how companies operate profitably on the global marketplace. As procurement manages the supply base and spend can account up to 80% of company turnover, the strategies deployed, technologies used and capabilities in procurement teams play a significant role in tackling disruption.
Whilst revisiting strategies, rethinking the role of technologies and reinforcing talent are not quick fixes by nature, they represent the domains procurement should continuously develop to be able to manage disruption proactively, instead of merely reacting to it. By theory, strategies should be revised first, followed by aligning technologies and talent. Yet, in practice it is likely that strategy, technologies and talent develop in parallel, feeding each other in the manner of a virtuous cycle at best. Global disruption is a challenge, however it can also be an opportunity for procurement to make a difference and become a true strategic contributor to company success.
Disclaimer: this blog post bases on author's own insights and experiences.
***************
Strategic procurement requires a diverse skillset including analytical capabilities, subject matter expertise and negotiation skills. Reflecting on the recent developments with logistics chain disruption, raw material shortages and rising input prices, the quest for talent in procurement capable of thinking strategically and holistically remains as strong as ever. This means the ability to think and strategize in terms of the entire supply chain and moreover, the network. This may be challenging as traditionally, we tend to think of supply chains as linear, when in fact they are shaped as networks. The ability to model a network, identify the most important actors and the linkages in between and recognize the position of one’s own company is a must for developing strategies.
In this context, the ability to act quickly and swiftly can be highlighted as well. Accelerated procurement can be adopted for plan-to-strategy and for the follow-on processes. This could entail the ability to execute sourcing projects quickly and reduce the cycle-time in contracting. Technologies help in suggesting suitable suppliers and contents for the RFP and in scanning the supplier market for feasible candidates. Contracting cycle time could be reduced by utilising pre-approved templates, running price negotiations and redlining in parallel, utilising AI to assist in negotiations as well as electronic signatures. In procurement, repeat purchases could be automated, and fast, light-touch or no-touch procurement channels set for certain commodities to enable automated approvals, pre-filled POs and digital transactions. In the future, it is possible that companies will set two kinds of execution pathways in supply management and procurement - one that supports and enables projects with slower clock-speed, and another for fast-tracking. These processes require different profiles from people that are running them.
Risk management capabilities are critical going forward. At times of stability, this may not have been the focus area for skill and competence development in procurement teams. Yet, as geopolitical instability and disruption have peaked, analyzing and understanding risks, drivers and impact on the supply network, and planning mitigating actions have become new operational priorities. Managing risk is no longer an after-thought or an isolated activity, but a key consideration and an integrated part of all buy-side activities. Legislation including the German Supply Chain Act and the planned EU directive for corporate due diligence in sustainability will oblige companies to assess, mitigate, document and report on human rights and environmental risks in the company’s supply chain. To comply, companies need to implement various system and process changes to ensure that they
- Know their suppliers
- Detect and analyse risks related to suppliers
- Process and document findings, share them with suppliers
- Produce the required reports
The “what” comes from legislation, it is the “how” companies struggle with, since the new requirements not only have an impact on systems and processes, but also on the expertise and capabilities that are needed to comply.
How can procurement become a function where people aspire to be in?
Traditionally, procurement has not been the first choice in terms of career development. When I was teaching at Aalto university and asked Master’s degree students if they considered a career in procurement, only a few hands (if any) would go up. When asking the same question in relation to sales, I would see a classroom full of raised hands!
The lack of enthusiasm for a career in procurement could reflect the general emphasis that media, corporate managers and industries have on demand-side dynamics and students picturing sell-side roles as more impactful than buy-side roles. But this does not have to be an either-or situation! For anyone working in sales, it’s vital to understand the professional buyer’s mindset and perspective. Equally, everyone working in procurement needs sales and persuasion skills, as without them, it is impossible to execute category strategies. Universities should offer a crash-course on procurement in sales and marketing classes, and vice versa, sales and marketing 101 should be included in purchasing and supply management studies. The same could be applied in the corporate setting as well. Why not have a joint training with sales and procurement teams ? This could work well for picking up a thing or two for those tough future negotiations that are undoubtedly ahead for both corporate sales people as well as for professional buyers.
********
Global volatility and resulting disruption challenge the established ways of how companies operate profitably on the global marketplace. As procurement manages the supply base and spend can account up to 80% of company turnover, the strategies deployed, technologies used and capabilities in procurement teams play a significant role in tackling disruption.
Whilst revisiting strategies, rethinking the role of technologies and reinforcing talent are not quick fixes by nature, they represent the domains procurement should continuously develop to be able to manage disruption proactively, instead of merely reacting to it. By theory, strategies should be revised first, followed by aligning technologies and talent. Yet, in practice it is likely that strategy, technologies and talent develop in parallel, feeding each other in the manner of a virtuous cycle at best. Global disruption is a challenge, however it can also be an opportunity for procurement to make a difference and become a true strategic contributor to company success.
Disclaimer: this blog post bases on author's own insights and experiences.
