Think procurement is just a process?

Following the publication of the CIPS Supply Century - Defining our future profession report, David Noble, CEO of the Chartered Institute of Procurement & Supply, analyses where the procurement industry is heading

Anyone who says they can predict the future are either exaggerating their forecasting ability, or are in possession of a time machine. Surely, no one human can fully have such capabilities, though some try. Futurologists, for one.

Futurologists, for there are such professionals, are in demand in many sectors and government departments as everyone struggles to remain competitive and build strong futures for their citizens and customers. A volatile, increasingly unpredictable world means that though there are no guarantees, we should at least try and stay one step ahead of the game in the procurement profession and see how procurement and supply management approaches are likely to change.

Building some level of predictability means anyone with a responsibility for buying, needs to take a strategic approach. This means a focus on market development, as well as creation, on creating a keen risk instinct, and understanding those challenges your department will face now, in a few short years, in a few short decades. Procurement professionals, more than ever, need to develop resilient mindsets, where building strong relationships are the key to avoiding any consequences of catastrophic events, or having a strong network where you can tap into different capabilities and sources of advice to build a strong steer in any stormy waters. Easier said than done, so, what are some of the challenges that lie ahead?

Technology and automation
This is, and will continue to have a big impact. Many of the transactional activities the profession has been performing will cease to exist and will become part of automated functions elsewhere, such as finance departments. To replace this, new skills need to come to the fore, such as a greater understanding of technological advances and to become adept at the management data. And sometimes, managing vast amounts of data, in a way that has never been experienced before.

Hand in hand with data management, is cyber risk, which has become one of the biggest dangers to life, interfering with health systems and to the financial institutions cementing the world together. The unprecedented number of businesses and public bodies that have suffered an instance of hacking, with the loss of precious data is testament to that. This threat is likely to rise in the coming decades as complex systems gain a momentum that humans will fail to be able to keep up with, without additional skills and networks to support.

Technology and data are serious disruptors in business and the public sector, so embracing, understanding, and management is the only way forward as this new world development takes hold.

Non-qualified buyers
In a recent survey undertaken by CIPS, on average, the level of procurement’s spend was in the majority of situations, 40 per cent, because almost every other role or profession, had a hand in procurement.

For a professional body that has tried to bring non-professionals into the fold, we must now treat buyers in a different way and stop thinking of ownership and land grabbing for the profession, but more about collaboration. Because the boundaries of the profession are being stripped away and professionals must now become more trusted advisers and the strategists of their departments and the teams they work with.

Buyers without a background in professionalisation will need more support than ever before, rather than be locked out of that support as non-professionals. These buyers will need the right knowledge, the skills, and capability to procure in ways that are ethical, sustainable, resilient and effective and they will need to be part of the vast body of knowledge and cross-skilling, with other professional bodies, and experts. We can all learn from each other. And, this approach has also developed within procurement itself.

Professionals are now diversifying into non-traditional activities such as mergers and acquisitions, customer bid proposals and product innovation, and these types of changes and innovations will continue and grow apace.

As trans-disciplinary approaches are required to break the back of challenging issues, specialists from various disciplines are likely to be helicoptered in for a project for example and then off to support on another piece of work as part of the new ‘gig’ economy. It is estimated that around 50 per cent of all work will be part-time by the year 2030 and the majority will be gig workers. Procurement professionals are likely to be part of the gig movement.

Risk and resilience
Procurement professionals have always had one eye on risk and the other on mitigation and solving the problem of disruption, and that capability will need to be honed and sharpened now, more than ever before. Procurement has always been there to be proactive, design robust supply chain networks and respond swiftly, but building resilience is the new approach.

Supply chains are more global, more intricate and all buyers will need to understand the cost of mitigation at various points, for example at the early negotiation of contracts stage. Plans should become more resilient and robust at the earliest opportunity. Knowing how the true cost of risk transfer works, means closer collaboration with finance teams rather than being at loggerheads. So, we all need to get smarter around risk.

According to the CIPS Risk Index powered by Dun & Bradstreet, in 2016, risk was at its highest level since 2013, and understanding what this means for your department means better management of taxpayers’ money and protecting reputation and trust in procurement capability.

The impact of upcoming Brexit cannot be underestimated, as it reflects the global move from globalisation to more protectionism and closed-off borders. What will this mean to free trade and free, flowing, flexible supply chains is something that procurement teams can advise and manage. It is likely that relationship management will become more complex and the new world order a different place from that enjoyed in the last few decades.

One thing is certain, to manage those risks, to seek expertise in other areas, suppliers will play an increasingly important role, not just as suppliers of goods and services, but as innovators and also risk mitigators. Decreasing risk in supply chains means suppliers must also have a greater understanding of the risk landscape, and maybe even share the resulting consequences of any disruptions or difficulties – or take strong steps to protect not only their business, but your interests too.

Agents of innovation
Think procurement is just process? Think again. Procurement teams are in the best place to understand the many social changes and technological advances in the coming decades. They can take the lead in developing policy and change behaviours in business, with suppliers and amongst the teams that procurement works with.

Sustainable procurement means codes of conduct for suppliers, audits to manage change and create incentives to do things better. A professional licence already mandated by some businesses means rogue activities from boards and CEOS can be challenged by the loss of that licence. Social value has become a new force where localisation provides the impetus to improve communities and local economies. Younger workers want to do good and not just earn a wage. Procurement will manage this eco-system where slaves in supply chains are traced and suppliers are driven to do the right thing. The Modern Slavery Act of 2015 has drawn attention to supply chains and those that manage them as clear evidence of the good that excellence in procurement practice can do.

For all this to happen, the perception of procurement needs to change from ‘order taker’ to ‘change leader’ as professionals become the guardians of an enterprise, whether corporation, SME or government department. The professionals themselves must also see themselves differently. They must engage more with internal departments, with colleagues, with partners, to become powerful networks and abandon the image of stationary buyers and pen pushers.

To read more, the Supply Chain Century paper is available free on the CIPS website, and is a result of our discussions with advisory groups, members, academia and our global community, to understand the procurement landscape of the next twenty years.