There are tremendous changes happening in digital areas like AIs, blockchain, IoT, and ERPs. Many business functions including procurement are still talking about their processes, flat, cross-functional or traditional organization structures with excellent execution skills. Since their foundation is based on this model, reducing transactions, having activities done faster, making data transparent and using data in decision making are considered as part of creating value. I believe procurement activities and transactions that are not on the main end to end value stream of an organization will be obsolete in a few years of time. And procurement needs to evolve into a business development function with a new definition “creating short and long term value for an organization from customers, markets, internal and external relationships.”
Procurement’ s Inertia
In many procurement summits that I joined, I witnessed perfect cases and presentations about advanced risk management practices, vendor reduction, and consolidation programs, cost improvement programs via procurement levers, organization transformations from central to regional, regional to central, massive supplier portal implementations, automations and etc.
Creating short and long term value for
An organization from customers, markets,
Internal and external relationships
Drive such changes in multi-billion dollar organizations having thousands of suppliers requires strong leadership, knowledge, energy and focus. However, to be boldly said, these advancements and progresses are not that different than evolution of cars from 1950s to now. Basically, we are still building everything on a chassis with four wheels but we are making them faster (agile), safer (risk under control), comfortable (digital) and energy efficient (less vendors and people).
Where to Focus
Today procurement and procurement people are sitting in a very important position in all organizations. With access to all strategic initiatives from product and services development to market launches, business growth plans to regional expansion strategies, procurement is indeed accessing to end to end value stream of every organization. However, due to competence and skill set of its resources and so much focus on improvement their traditional way of running business like supplier relationship management programs, p2p transactions, internal stakeholder management, optimization projects and by only focusing on bottom line figures, procurement is missing its main opportunity which is expanding network value of their organizations through business development.
Road to Disruption
While we continue to build faster, comfortable and energy efficient cars with wheels, we need to start thinking about new platforms which do not require any roads, wheels and drivers. A business model approach which starts by a new value creation model, revenue and EBIT maximization model and a logical connection of those two, may be starting point of a new structure that procurement may evolve. From my point of view, that is an extended version of business development function which is focusing from short to long term value creation through internal and external relationship management, markets and customers. This requires a thorough redesign of transactions and activities where robots and AIs can run easily on those and of course turning procurement people into businessman and woman.