What is Future Procurement?

Much is being written about ’Future Procurement’, mostly envisaging a new, expanded role for the existing function.

While those forecasts may be correct, I prefer to view this topic through the lens of organizational competency, rather than assuming the need for a specific function or experts to create capability.

What are the problems with procurement today? Why is there this constant drumbeat about the need for change? Many would say those performing the role are too narrow in their thinking, too limited in their accountability, too constrained in their contribution and that overall capability lacks coherence (and to the extent this is true, it is typically not the practitioners at fault, but the constraints put upon them by outdated rules, processes, measurements and systems).

So in this context is it procurement that’s wrong, or is it a failure to look more holistically at the capability to deliver outcomes through or with external providers? This capability requires coordination across multiple stakeholders – it is a cross-functional integration role, not a traditional discipline; and it certainly is not something that today’s practitioners have been taught to do. So why would we assume that procurement steps into that role?

Therefore we must give thought here to the question – ‘are we seeking to fundamentally redefine what we mean by procurement, or are we trying to reform or redesign the current procurement phase to fit better within an overall delivery system?’

Among the challenges we face that have driven a need for reform are:
– the massive increase in externally acquired goods and services
– the steady shift from acquisition of goods to a predominance of services
– the continuing evolution of relationship types and models with little thought given to the organisational capabilities needed for their management

On top of these, the scale of market change and uncertainty today require fundamentally different capabilities to assess, to contract and to manage. Adaptability, agility, predictive capability, dynamic reform – these are not characteristics that those outside the function generally associate with procurement.

So what do we need? As one senior executive recently said to me, “we could essentially outsource everything except contract management – and that’s arguably the area of capability where we’ve made the least investment”.

I think few would disagree that procurement capability needs to change, to be more adaptive and responsive, more effective at analysing and replicating its own success. But does the role itself need to expand, or does it need to be better instructed and managed, provided with fit for purpose tools and policies? In a perfect world, I might argue that organizations want full self-service capabilities without function. ‘Future procurement’ may well be fulfilled by people equipped with intelligent machines.

With this in mind, modern procurement should be an enabling and oversight function, equipping the organisation with the tools and knowledge needed to successfully select and manage supply relationships.

To do this, there needs to be segmentation based on the type of relationship needed to achieve the required outcome. That’s because different forms of relationship require very different skills and capabilities for their management. 

Traditional procurement was strongly focused on input. Indeed, as a former head of the GSA in the US observed ‘we often undertake a perfect procurement and achieve completely the wrong outcome’.  Too often, procurement has been a rules based system designed to support product acquisition. 

When it comes to delivering value, contract award is the beginning, not the end. While there has been some excellent work reskilling and attempting to convert thinking from ‘procurement’ to ‘commercial’, post-award skills and competencies have until recently been largely ignored and the transformation of existing thought and behaviours are at best patchy. Even where training has been applied, its effectiveness is constrained by the actions or inactions of others – for example, legal, finance, operations – or the embedded assumptions of executives or suppliers.

Leading practice is to design for a full acquisition lifecycle. And in this wider context, at a recent conference, delegates recognised that procurement is just one phase in the much wider discipline of contracting.

So I would suggest that the question regarding ’Future Procurement’ is one that we cannot and should not seek to answer without first having defined and understood the overall contracting lifecycle – from inception of requirement to delivery of outcome or termination of need. It is this capability that is missing and simply fiddling with procurement may enable marginal improvements, but will not fix the problems.