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The BIG question for Procurement

June 13, 2018

More and more is written about the future of Procurement and the shift that is required in its approach. Collaborative, value-focused,  approachable – there is extensive commentary on the changes in behavior and attitude that are needed to engender trust and thereby raise functional status.

These observations are not new (I can recall similar discussions regarding value and status going back more than 20 years). Emerging technologies certainly make them more urgent, since a high proportion of procurement jobs are under threat. So the big question: why isn’t Procurement changing?

It’s easy – and tempting – to use excuses. Among the most common are the impact of the internal measurements (negotiated savings and compliance) imposed from above, or the untrustworthy behavior of suppliers which prevents collaboration. But the truth is that these issues won’t go away unless procurement personnel make them go away. They have power over their own destiny.

We will squeeze them until the pips squeak

Behaviors are embedded. It takes leadership and determination to make them change. I’m told that much Procurement training still perpetuates the adversarial, them-and-us attitudes that undermine a shift in status. Often, those who should be setting an example fail to do so. For example, at a recent meeting, a leading advocate of collaborative working felt the need to explain that ‘Collaboration doesn’t mean weakness – we’ll squeeze suppliers until the pips squeak’.

And suppliers confirm that, in general, Procurement attitudes aren’t changing. There’s lots of talk about value, about delivering outcomes and working together, but for many the reality is a process-driven approach with little evidence of shared responsibility for performance.

Beacons of hope

There are beacons of hope. Tesco, a large UK retailer, has recently been cited for its progress in shifting from a highly adversarial approach to one of increased fairness and respect for its suppliers. General Motors is another example where supplier ratings have improved dramatically in recent times, reflecting a move away from its power-based approach towards the supply base. In Australia, CASG (the procurement arm of the Department of Defence) is a true leader in developing its contracting and relationship management expertise and Jemena, a power utility, is also at the forefront of change.

We see an increasing number of individuals and groups that are opening their minds to different training and certification providers, recognizing the need to break from ‘old school’ thinking. At IACCM, we continue to experience growth in the number who realise not only that suppliers are not the enemy (there is actually interdependence), but also that shared learning, shared methods, shared terminology offer the best route to mutual understanding and respect. These groups also appreciate the critical importance of gaining broader commercial skills, rather than an exclusive focus on procurement and logistics.

It is perhaps the issue of respect that is key to change. By working together, customers and suppliers can achieve great things. To flourish, Procurement personnel must become the instigators of change. It’s a choice –  and truly does represent the BIG question.

IACCM will be running a series of programs on the BIG question, Procurement and change. Watch out for webinars where we will feature those who are successfully transforming and this will culminate in  workshops and discussions at the IACCM Americas conference, ‘Collaborating Across Boundaries’, in October. (visit http://www.iaccm.com/Americas)

 

 

 

One Comment
  1. Hi Tim,

    Firstly, thank you for recognising “our” (CASG’s) efforts in this area. As you know, having had IACCM help “us” put together our Collaborative Contracting approach, this has been part of a multi-year Commercial Reform Program that started in 2015 and is ongoing.

    That said, I did want to mention the importance of not only the procurement (commercial) community on delivering this goal (regardless of whether buy or sell side), but also the role of the other “actors” in these arrangements. I am specifically talking about the executives, vice presidents and the general managers, the project managers and directors, engineers and technical staff, and the logistics and supply chain staff. These non-commercial staff also have to believe and act in a manner that is consistent with this changed relationship between buyer and seller. I have seen the situation where the collaborative efforts of the commercial buyer and sell team has been undone by an eager project manager keen for a short-term price reduction without considering the long-term value of a strong collaborative relationship. However, I have equally also seen our commercial teams do the same.

    The solution? While it is critical that we as a commercial community focus and lead this, I think it equally critical for the commercial community to upskill the other adjacent communities (e.g. project managers) on the benefits of a collaborative contracting approach. For example, running short, half day commercial awareness courses highlighting what the commercial team is doing and why is important will at least to help others understand and potentially align thinking. For Collaborative Contracting to work, we need everyone to believe and act this way, as collaboration is a team sport.

    Regards
    Dr Andrew Jacopino

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