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Has Procurement really changed?

October 4, 2017

The field of Procurement has been undergoing rapid and significant change.  All the experts predict that the era of change is not over – indeed, quite the opposite – it is speeding up.

How successful has Procurement been in making the adjustments expected of it? IACCM has been undertaking research – ‘Procurement Present & Future’ – to find the answer and to discover priorities for further improvement. While input from the function itself has been welcomed, our particular focus has been  on those who interact with Procurement – other internal functions and stakeholders, plus suppliers.

What’s the verdict?

There is widespread agreement that Procurement has become more influential. This has been especially noticeable in its focus on compliance and allocating greater risk to suppliers. Around 70% have also noted the relentless pursuit of lower prices, with around a third noting a shift towards the broader measurement of ‘cost of ownership’.

Given these observations, it is not surprising that few perceive Procurement becoming better at building collaborative relationships. In fact, internal colleagues actually think that Procurement has gone backwards in this regard; supplier personnel are a little more generous, but still only give a rating of 6 out of 10 for this capability.

SRM is a bright spot; technology gets mixed reviews

Supplier Relationship Management (SRM) receives positive reviews for the contribution it makes to improved results. Category management is also seen as helpful. In organizations where they have been introduced, both of these initiatives link to perceptions of increased professionalism.

Technology has been an area of major investment for many Procurement groups, so has this generated a positive return? Views are mixed. There is consensus that systems are generating better data, supporting improved conversations and performance management. However, outside Procurement, there is no great feeling that automation has streamlined procedures, nor has it resulted in fairer rewards. Indeed, suppliers identify procure to pay systems in particular as overall damaging to business results and the ‘fairness’ associated with contract award.

So does it add up to greater value?

Overall, the results support the view that change has been occurring. Certainly Procurement appears to have been increasing its control and making its presence felt – and it is not surprising that these characteristics are not popular with everyone. But of course the real question is whether those increased controls are starting to deliver real business benefit. That is where the jury appears still to be out. Scores in areas such as business judgment, delivering innovation and operating flexibly are on average negative – and this sums up to very mixed views on whether Procurement has actually increased its business value contribution in the last five years. By a small margin, suppliers feel that value has increased; by a slightly larger margin, internal colleagues feel that it has not. Clearly, there is still progress to be made – and the pressures for rapid change will only increase.

To participate in the IACCM survey and receive a full copy of the ‘Procurement Present & Future’ report, visit https://www.research.net/r/Procurementpresentandfuture

2 Comments
  1. You pose a very interesting question !

    Has procedures really changed ? Well … in my view I would have to say it depends on (1) the industry and (2) who Procurement reports to within a given organization.

    For example, if procurement reports to legal, you will find that allocating greater risk to suppliers is a top priority. Automation… not so much.

    If procurement report to finance, the focus will be on lower prices and not so much on allocating greater risk to suppliers. Automation will be a priority.

    It also depends on what industry you are referring to. For example, the aerospace industry is very aggressive to change within the procurement area. Always looking for new ways to collaborate with suppliers, improve internal processes and automate more functions.

    However, the mining industry is quite different. We have seen slower change in this industry when it comes to procurement. The industry in general has been doing things pretty much the same way for decades with marginal changes.

    End

  2. Some great points. At Market Dojo (on-demand eSourcing solution) we’ve also seen the increasing influence of procurement. When it comes to sourcing suppliers there is typically a challenge between meeting the needs of the operations team (and their preferred supplier choice) and the procurement team ensuring that they are getting the best possible value from their suppliers. During recent times there has been an increase in responsibility and ultimately the decision (and trust) for procurement to negotiate effectively.

    My opinion is that this has been invaluable in procuring real business benefit and making savings to the bottom line.

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