To imagine how Procurement organization may evolve, let’s have a look at the mega-trends of Corporate organizations.
“Making predictions is difficult, especially when they concern the future,” Pierre Dac rightly stated. Let us try nonetheless to imagine the effect of three major trends seen in large companies on Procurement organizations.
Always towards more efficiency
The first trend should come as no surprise: the constant search for efficiency. It has been heightened by increased competition from low-cost countries and a gradual shift in decision-making power towards shareholders since the 1980s. The need to generate a better profit margin while dealing with exacerbated competition makes productivity gains essential. It is therefore a matter of simplifying processes as much as possible, of outsourcing all non-core tasks to specialists and eliminating low value-added tasks either by simplification or automation.
Procurement still has a long way to go. How many companies still assign buyers monotonous tasks that require little to no intelligence such as searching for expense data in multiple systems, updating prices in catalogs, verifying purchase requests, taking information from a system and typing it in another, to chase after an undeclared reception…? All kinds of tasks that can be automated or alleviated when the problem is tackled head on. The advent of new digital tools is changing the game and Procurement departments should seize the opportunity to reallocate their resources on value-added tasks.
Integration of Operations and Functions
The second trend has to do with the relationship between Operations and Functions. The era of the lone ranger is definitely over. Not a single project, not a single important activity can advance in today’s business without a multifunctional team. The network is worth more than the hierarchy. With that in mind, Functions are to be considered as business partners of Operational teams, that is to say involved early on in initiatives, in contact with the client and with perfectly aligned objectives.
This key trend can take different forms in Procurement. For instance, the set-up of multifunctional teams to do value engineering on a given category or project. Likewise, category management should be implemented exclusively as an activity conducted by a group of people – the Category Manager playing the simple role of conductor. Taking it a step further, Procurement should focus only on high-stakes categories leaving it to the users to manage the rest. B2B marketplaces offer a fantastic opportunity to do so in a structured and reasonable way. Their emergence makes it possible for Procurement to rethink its scope and mission.
Fewer Management levels
The third trend touches upon the overall organization of companies. To me it seems that more and more CEOs are in favor of having fewer management levels with organizations made up of smaller entities. This trend gives pride of place to entrepreneurship. Better reporting systems have made middle management less useful for the steering of the company. Furthermore, CEOs have increased their efforts to ensure that all the levels of the company take ownership of their project without any filter – what some consider to be middle management. So it seems that a central purchasing organization with a single line of command that generations of CPOs have dreamed of seems incompatible with the new way of getting organized. Now more than ever, we must develop the individual leadership skills of buyers and learn to work as part of a network using the tools currently available to leverage size in decentralized organizations.
Let me know what you see in your crystal ball. We will award a medal to the best Procurement fortune teller in 10 years time.