Procurement: is it time for a re-brand?

What’s in a name?

“A rose by any other name would smell as sweet” would Shakespeare’s sentiment apply to procurement. Procurement for many years has been challenged by a lack of executive advocacy, influence and inclusion in strategic plans. Why is that?

Theory and Context

Everyone has their own idea of what procurement means. Is this because we all have the ability to purchase and procure in our everyday life? Buying expensive goods and services, technology, motor vehicles, even complex purchases such as property are regular occurrences for most individuals today. Purchase to pay has been commoditised due to advanced ecosystems and self-service applications. On line catalogues have opened universal access to employees to procuring goods and services. So, has this attributed to commoditising the procurement brand?

For decades procurement had been the tool to make cost savings. Organisation structures have procurement reporting to the CFO attributing to the cost saving mantra.  I always attribute the CFO function and finance part of the business to the negative side of the balance sheet associated with cost containment and managing within or under budgets. How exciting would the role be if it was reporting to the Director of Sales or Marketing, responsible for revenue generation, value delivery and growth. A rarity I suspect!

The cost saving focus of the function has led to commoditisation and the misunderstanding of the role of procurement and the value it delivers as part of the organisations strategic positioning.

We are not alone!

Many other departments have had similar issues being recognised building executive advocacy, influence and being strategic. We are in the age of organisational transformation. Customer centricity has become the key focus for many organisations led by the private sector. The ability to deliver a point of difference in very competitive industries is a strategic advantage. We have even seen the emergence of the customer way (or should it be citizen) in many government agencies and departments.

Human resources have seen a massive transformation in its image and brand. A 2015 Bloomberg article cites some great examples of HR rebranding, such as Mailchimp, the email marketing service provider. The HR director assumed the title of “Chief Culture Officer.” Now, in addition to the daily operations of HR, Rebecca Greenfield and her team work on creating a culture of creativity and innovation. They utilize this new rebranding to focus on worker happiness and inclusivity, along with employee engagement and regular activities to engage workers. This a clear example of repositioning the role and function of HR.

Another example is taken from an article written by Kim, D. (2012). HR branding: How human resources can learn from product and service branding to improve attraction, selection, and retention. Cornell Hospitality Report states “HR branding can be used as a strategic tool to manage different aspects of the employment experience—from attraction, to selection, to retention—ultimately yielding higher quality and more motivated employees.

An article in the HR executive titled a “Change in the C suite” by Eva Sage-Gavin highlighted; Chief Leadership Officer and Chief Learning Officer have been in place for a while. We are seeing new roles like Chief Experience Officer and Chief Collaboration Officer emerge. Chief Culture Officer is particularly important. While some chief culture officers work within HR, others may report directly to the CEO. 

Customer Service has also seen a transformation and re-brand. Experience is seen as being the key differentiator and many organisations have transformed into focusing on customer experience. Shep Hyken in his article in Forbes Customer Experience Is the New Brand states that “the race to own customer experience is on! Companies are recognising the importance of delivering an experience that makes them stand out from their competition.” This concept is not new back in 2007 in the Harvard Business review Meyer and Schwager published a paper on Understanding Customer Experience stating, “although companies have zeroed in on customer experience many have been trying to measure customer satisfaction.” They looked at and measured Customer experience management versus customer relationship management and charted a risk matrix based on a sample of high-touch customers.

The focus on Customer Experience today has seen the whole Customer Service Sector move to a rebrand with a plethora of CX conferences, knowledge, publications and consultancies.

We can’t forget IT.  This sector has and still does have its challenges as technology has commoditised many of the functions. The drive for Big data (Data analytics) and the importance of decision making, and strategy being based on the insight from data has seen the traditional IT and ICT executive roles move to the title of Chief Information Officer. However today we see this at risk through the hunger to gain competitive advantage in the rapidly changing technology sectors. We now have the Internet of Things, Automated Intelligence, Robotics, Augmented Reality. The move from just technology and Infrastructure has been pervasive and so has the move to create new relevant executive roles and titles.

In March 2015 Mark Shapland in an article for the I-CIO magasine discussed the CDO v CIO (Chief Information Officer v Chief Digital Officer) landscape, commenting “As waves of digitization have swept through organizations, there has been a growing debate about the value of a new addition to the management mix: the chief digital officer (CDO)”.

Another great example of this is the overview from Gartners Partha Iyengar that the transformation owner in the enterprise is potentially moving from the traditional holders of technology.

Who is leading digital transformation — the CIO, CMO or CDO?

The right Brand

It is fair to say that procurement’s time is coming! With Countries adopting the Modern Slavery Act and the focus on the General Data Protection Regulation (GDPR); management of risk will be paramount for all organisations. Not only are there hefty fines but there is also the risk of demonstrable damage to brand and reputation.  If you combine this with social agenda and the rise of social procurement regulations, ethical, transparent procurement will be a strategic priority and will become one of the top 10 risks of many organisations.

Over the years I have seen many nuances on the naming and branding of procurement, here is a list for your edification;

Procurement, Procurement & Supply, Procurement & Supply Chain, Strategic Procurement, Strategic Sourcing, Strategic Sourcing & Supplier Management,

Commercial, Commercial Services, Commercial Procurement.

Conclusion

Do we need a name change or brand? (Procurious-Michael Page research in 2018 saw over 70% of CPO’s stating no). Does the capability of procurement practitioners constrain the opportunities and ability to gain advocacy and influence with executive leaders? For many years this has been the number one challenge for procurement. Our time in the sun is approaching, how do we as a profession grab this with both hands? Organisations such as CIPS (The Chartered Institute of Procurement and Supply) help to position our profession through a global standard and ethics charter. The chartered status ensures that you have the knowledge to assist with the strategic risks in complex supply, management of protecting people within the supply chain and mitigating risk of brand failure through unethical sourcing.

In looking for unconstrained and new branding here are just some limited ideas to wet the appetite;

Value & Acquisition, Strategic Acquisition, Ethical Sourcing, Ethical Acquisition, Value Securing, Acquisition Solutions, Social Sourcing, Strategic Supplier enablement. What do you think?

The Future of Procurement and Supply Chain

Artificial Intelligence, robotics, digitisation of tools and systems will replace the procurement and supply chain functions within many organisations over the next decade or so. There has been gloom and doom touted over the past few years for a profession that has not always been seen as a significant function within organisations.

The 2018  Deloitte  CPO survey One in 5 CPO’S thought that cost reduction what is important,  54% new product development and 58% risk management.

So what has changed in the past 35 years?

Peter Kraljic developed  the portfolio purchasing model (Kraljic matrix) where financial impact and supply risk were mapped into a 2 by 2 matrix articulated in 1983;  “Threats of resource depletion and raw materials scarcity, political turbulence and intervention in supply markets, intensified competition and accelerating technological  change have ended the days  of no surprises. As dozens of companies have learned, supply and demand patterns can be upset virtually overnight.”

Looking at our world today, has this changed or are the above issues more prevalent now?

Traditionally procurement has been seen as a cost cutting and savings function in the organisation by CEOs and CFOs. 

However procurement should always be seen as adding value – simply not a process or transactional function.

Letting technology do what technology does best – managing repetitive, standardised tasks is the same outcome that challenged HR, Finance and IT functions. – CPOs must create time to listen to internal / external stakeholders, be they suppliers, customers or internal peers and managers.

Paul Blake, associate director, product marketing at GEP highlighted that the Deloitte survey suggests they certainly need to make time as fewer than one in four respondents thought they were excellent business partners to their suppliers, although 86% aspired to be.

Visibility in the supply chain has also raised as a key issue. A 2017, a survey of 623 supply chain professionals across 17 countries found that achieving full visibility was a top priority – however only 6% believed their organisation had achieved it.

6%  highlights a major risk lying dormant in most organisations! This presents an opportunity to turn supply chains into a proactive network where information is shared in trust for mutual benefit.

Trust requires relationship management and open and transparent supplier relationships -building trust and collaborative partnerships even with past competitors (co-opertition ) is paramount for future success and risk mitigation.

Blake stated that in the world of procurement, there is a real opportunity for CPOs to collaborate in an ecosystem of partners.

Strategically working with internal stakeholders ( customers ) is key to procurements future success. Customising value propositions, alignment to the vision, strategy , operational plans,  tracking levels of satisfaction and setting targets for satisfaction”  is always what procurement has been in visionary led organisations.

Centre-led not centralised ! Centre-led doesn’t infer that you can’t centralise key strategic procurement functions especially around governance, policy, standards and strategy. Embedding resources within the organisation enhances the trust and partnership of the internal relationship.

User and Customer experience “making it easy to do the right thing” is procurement’s future role and function. Tools and systems will enable delivery in simple environments. The “Procurement Value” is enabled in complex and difficult environments.

Talent, skills and competencies are key to developing a procurement function (or functions) that become the trusted advisor in our businesses.

EY in their document Infinite possibilities Procurement in 2025 stated:  “Bottom line: By 2025, procurement risk management will undergo a major evolution, moving from discrete/ qualitative approaches focused on disruptions to a continuous/quantitative function integral to all sourcing and supplier management decisions”.

Most organisations have a spend of between 50-70% attributed to third party suppliers

How do you determine value form a supplier when you have no ownership?  This is usually achieved in some instances through prescriptive and onerous contracts. On these occasions how often is innovation delivered?

“By 2025, the leading procurement organizations will serve as a primary channel for driving innovation ideas to/from a global supply base, and procurement professionals will play a critical role in driving new product development and evolution”  EY

How do you know if the supplier has a propensity to deliver value? This is a key factor when you have never had a previous relationship with that supplier

After 4.5 years of research across New Zealand and Australia, Mike Blanchard has developed a methodology and model to help determine value characteristics from suppliers. 28 factors through research and regression testing were reduced into 6 key areas:

  • Sustainable Partnership Value
  • Shared Vision & Intelligent Information
  • Trusted Relationship & Quality
  • Aligned Value Innovation & Culture
  • Skilled & Specialist Resources
  • Flexible Organisation driving continuous improvement

Paul Blake at GEP highlights all of the above in a simple statement “CPOs who embrace openness, modularity and the quality and ease of user experience – freeing  up time and resource to manage the strategic challenges facing their organisation – are much  better positioned to succeed”

As a CPO where are you on the continuum? Are you still dealing with too many transactional business challenges or are you really helping with the Organisations strategic plan?

Much of the inspiration for this article was taken from the Supply Management Insider and GEP paper the 5 steps to ensure that procurement has a viable future and EY’s Infinite possibilities Procurement in 2025.

Written by Mike Blanchard Chartered FCIPS, Masters in Supply Chain Management and Member of the Australian Institute of Company Directors  linkedin.com/in/mike-blanchard-fcips-chartered-mscm-maicd-8734661