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Supply Chain News: Advice for Procurement Managers – Focus on Speed and Agility in 2018

 

New Paragidm is Emerging in Procurement Function

 

March 5, 2018
SCDigest Editorial Staff

Procurement managers should heed this piece of advice: Your CEO is worrying about speed and agility in 2018 so you should be worrying about it too.

So says Guy Strafford, an executive at procurement technology company Proxima, writing recently on the UK's SupplyManagement.com web site. In fact, Strafford says 2018 will be about something fundamental: how CPOs respond to the desire from the top to move faster.

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Companies across industries are supplier shopping, ready to unseat legacy suppliers in favor of smaller ones who are more nimble.

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"Let's face it, speed is not an attribute often associated with our profession," Strafford interestingly writes. "Procurement can be a highly process-oriented, administratively driven opponent to speed because of the perceived need for ‘seven stage sourcing' cycles."

But the CEO sees the world through different eyes.

With "Responsible for top-line growth, executing with vigor, reacting to competitive pressures and real-time changes in markets, the chief executive may not always be most concerned with the procurement team's ability to scour the globe for the cheapest possible supplier," Strafford observes.

He says that the CEO's greatest frustration is often watching how long it takes for decisions to convert into delivery. So they will value a procurement team that is agile, nimble and can respond quickly to immediate needs.

"Speed of response is the new competitive edge," Strafford notes.

Given these dynamics, it's fair to question the placement of procurement in today's organizational structures, as senior leadership pulls the procurement function in different directions depending upon whom it reports to.

What's more, because so much of an organization's costs are spent with external suppliers, "the implementation of a CEO's vision or directive at pace is likely to be executed by suppliers anyway. It stands to reason that procurement will have greater engagement with the CEO," Strafford says.

But getting there will require a paradigm shift of sorts, Strafford says.

"Procurement teams will need to demonstrate the ability to respond quickly, react vigorously and shed many of the old stereotypes," he opines. "For example, insight needs to be available all the time, not just after an RFI."

In fact, Strafford says Proxima is seeing tangible evidence that this need for speed is changing the way procurement interacts in the organization and where procurement leaders are teams are positioned in the organizational chart. That includes seeing more examples of CPOs reporting directly to the CEO, even in industries where this reporting structure has rarely been seen.


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Perhaps more interesting, Strafford also says that the traditional months-long RFI process is getting either massively shortened or done away with altogether.

Why? The answer by now should be obvious: speed.

"Internal procurement leaders are expected to stay attuned to market trends and opportunities in real time by accessing data and relying more heavily on specialist supplier intelligence," Strafford writes. "There's no time for extended information-gathering projects."

If Strafford is correct, that would be a new paradigm indeed.

He is seeing other important changes. For example, he says that companies across industries are supplier shopping, ready to unseat legacy suppliers in favor of smaller ones who are more nimble and which can meet company needs with greater speed and agility.

"Rather than leave vendor management to haphazard business practices, procurement is going to grab with both hands the opportunity to make suppliers move faster, and thereby also bring transparency to supplier performance and risk across their business," Strafford concludes.

Does the procurement function need to increase its speed and agility? Let us know your thoughts at the Feedback section below.

 

Your Comments/Feedback

David Taylor

CPO, Company
Posted on: Mar, 06 2018
Typically  thought provoking piece from Guy! I do agree that agility is becoming more prevalent, and the procurement
function needs to be much more enabled with near real time data to see the risks and opportunities emerging.
One word of caution, speed cannot be at the expense of sustainability, in every sense.

Ashley Collins

Principal, Independent
Posted on: Mar, 08 2018

Thanks Guy for your provocative thoughts regarding Procurement's need for agility. Procurement practitioners are caught between a rock and a hard place on this subject. We collectively identify the need for speed (sorry) however the thought of compromising the #-steps is always in the back of our minds. The Marketing function in particular has typically been a barrier to entry for Procurement as a result of the (perceived) paradigm of time consumption in order to achieve their desired outcome tomorrow.

The answer is in how Procurement prepares in advance to work alongside the business to achieve the desired outcomes as objectives aligned to business strategy. For example Procurement should be sitting with business partners in AOP discussions year on year such that they have a more complete understanding of stakeholder / business unit requirements. Procurement's pipeline is then built well in advance of the following year's commercial activity enabling Procurement to avoid compromise to their preliminary Process Steps (Define Category / Determine Sourcing Strategy / Vendor Selection / Go to market method) and hit the ground running at the same time.  

Margie

Sutherland, Blue Cross Blue Shield of IL
Posted on: Mar, 09 2018
Interesting, indeed, especially since I told my former employer that the RFIs on our engagement were a waste of time and "time suckers."



 
 

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