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Beyond Spend Management

May 6, 2010

Last week I participated in a conference on Procurement Cost Management. The event, staged in Barcelona, attracted an impressive array of Chief Procurement Officers from major European companies.

When I agreed to speak (and chair the second day), I anticipated that most presentations would focus on new and draconian measures to enforce compliance and grind savings out of the supply base. It was therefore a pleasant surprise to discover the extent to which speakers and audience were attuned to more collaborative behaviors. Indeed, session after session highlighted the need for Procurement to transform its image both internally and to the supply base.

The theme of my presentation was ‘Gaining an Internal Trust of Skills and Capabilities’. I sub-titled the session ‘Beyond Spend Management’ because the core of my message was the need to continue the Procurement journey and to build on the benefits achieved from increased control over spend.

Recent years have seen a focus on compliance and category management. But in gaining control over spend through these mechanisms, Procurement has alienated many of its interfaces, internal and external. It is frequently seen as a destroyer of relationships, rather than as a builder of value. It is also pereceived as fulfilling the agenda of other people (especially the CFO), rather than having a value proposition of its own. Now is the time to leverage past success and to demonstrate a larger and more strategic business contribution.

There are several areas in which this change must be achieved. Procurement groups need to move:

  • from process to judgment
  • from implementing the agenda of others to influencing that agenda with new ideas and methods
  • from treating suppliers as adversaries to suppliers as sources of innovation and value

To achieve these goals, Procurement groups must deliver commercial competence throughout the product or service life-cycle. They must become skilled at communication and relationship management. They must discover how to integrate market opportunities and needs with supply capabilities and innovations.

I found tremendous accord in many of the subsequent presentations. The CPO community was highlighting that contract and relationship skills and better use and understanding of terms and conditions were key to the future – and an area of skills shortage. Most were unaware of IACCM and its mission or membership – but that is no longer the case!

In coming days, I will feature a summary of some of the presentations from this conference, highlighting the changes that are being made in Procurement organizations as they strive to adjust to the needs of today’s market and business conditions.

  1. Alex V.Tardecilla, MBA permalink

    Thank you, Tim for confirming that collaboration between buyer and seller are alive and is driving today’s supply chain transactions!

    • Alex, I think it si certainly alive, but perhaps not always flourishing. The behavior and attitudes of both sides can frequently undermine the longer-term implications of ‘collaboration’ for the shorter-term imperatives of today – see. for example, my recent article on collaboration and CFOs or on ‘abusive’ terms and conditions in the technology sector.

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