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Should Procurement Exist?

July 25, 2013

Guy Strafford has written an excellent article in the Proxima newsletter, asking whether the name ‘Procurement’ is toxic.

As Guy acknowledges, he is by no means the first to raise this question and indeed there are several articles in this blog raising similar points. A few months ago, I highlighted the issue of functional name, with the observation that efforts to shift from Purchasing to Procurement to Supply Management etc. could be seen as steady maturing of the role and skills, or an attempt to escape reality.

The fact is that executives seem unwilling to change the underlying measure (savings) which does so much to undermine the value that Procurement delivers. And perhaps this is not going to change – maybe this specialist focus is exactly what executives want.

The problem this creates is when the business – or indeed the Procurement function itself – then expects a wider role – for example as ‘commercial managers’. In order to gain real and sustained value from trading relationships, there needs to be a level of oversight, understanding and judgment that a narrowly measured function cannot provide. This is true of Finance, Legal, Risk Management and many other groups. Specialism and focus does not mean there is no value – but we have to recognize its limits.

So to Guy’s point, I think perhaps the advocates of Procurement are creating false expectations regarding what they can deliver. It is this disappointment that then makes the role ‘toxic’. Rather than claiming a capability they do not have, many Procurement groups may be smarter to get on with doing what they do well, and pointing out to management that if they need business coordinators, people with balanced commercial judgment, then they do indeed need to develop a new group or function. Maybe it should be called Commercial Management or even Trading Relationship Management; and in my opinion, its mission should be to enable success across all trading relationships, buy and sell.

 

One Comment
  1. Greg P permalink

    I work at a FTSE 30 firm in our Supplier Relationship Management team, which is indeed a separate entity with distinct reporting lines that has the express role of taking the contracts that procurement delivers and running them for the duration of the “in-life” phase. I would therefore suggest that top executives are already realizing that this split in focus and skill sets is necessary and beginning to implement it within leading organizations.

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