Procurement as a function has seen rapid change in a relatively short span. The value creation of this function has increased multi-fold becoming more strategic, collaborative and technology driven. This momentum is expected to continue and quicken in the coming years. Procurement will emerge in the forefront as an important and integral function of most business enterprises.

Procurement Transformation

Digital Transformation

Supplier Relationship

With the advent of technology, organizations have started to realize the growing importance of suppliers in terms of innovation, security of supplies, corporate social responsibilities, risk mitigation and cost savings.

Strategic Partnership will be at the top of the corporate agenda and SRM (Supplier Relationship Management) will be seen as a significant differentiator. SRM is a systematic approach for developing and managing partnerships. It is focused on joint growth and value creation with limited number of suppliers based on trust, open communication, empathy and win–win orientation.

4 C’s Model for SRM

The 4C’s model will govern the future of Supplier Relationship Management – Capabilities, Continuous Growth, Customer of Choice, and Creating value.

The speed of business continues to accelerate, market expectations are higher, product life cycles are shorter, turnaround times are faster and the risks are wider and deeper. Clearly organizations rely on suppliers to bring innovative and new products to their markets.

Essentially the Procurement function will have a sound understanding of the supplier markets across the world and be able to link their potentials and limitations.

Procurement will have to become more business oriented, more mature and integrated in its ways of working. All of these reinforce the need to re-invent a robust Supplier Relationship Management.

Suppliers are increasingly being looked upon as trusted business partners and engaging them early and ensuring all parties are on track, will propel the Procurement organization to greater heights.

Business Stakeholders

Procurement has been rapidly evolving to keep pace with the changing trends. The procurement profession has made significant leads, the focus of the procurement leader having moved from Price Management to Category Management, and in the future it’s very clear that the focus of procurement leader will move from Category Management to Strategic Sourcing and Value Creation for the business. The intent being, that the Procurement Leaders will also influence the decisions of the other functional leaders related to procurement, by helping them to make more ‘informed’ decisions which are not just cost effective but also more aligned towards the goals of the business.

The challenge seen by many procurement professionals is to
move from being seen as just a service provider into being
recognized by stakeholders as a trusted advisor.

Becoming a trusted business advisor is a long drawn process and is time consuming; it varies from person to person. We have seen that the relationship with stakeholders is usually good at a business level only. Most stakeholder relationships are at Service Provider level and at best, Enhanced Service Provider level, providing answers, sharing expertise and resolving business related problems. The individual has to not only understand stakeholder needs but go beyond, to understand the breadth of business challenges and develop a depth and camaraderie in the business relationship to build trust and hence be an influencer to enable a smart decision-making practice by all leaders.

This elevation to a Consultant level requires more insights and ideas into the stakeholder organization on broader business issues which can be achieved through focus, time and effort.

The challenge seen by many procurement professionals is to move from being seen as just a service provider into being recognized by stakeholders as a trusted advisor.

Few people achieve the trusted advisor relationship. At this level, there is a comprehensive understanding of all the stakeholder needs and they look up and reach out as first person to help them tackle the difficult issues they may be facing.

As the Procurement function changes, it will need people with new skills. Apart from being comfortable with data, future procurement professionals will need to be prepared to lead rather than simply serve their business. A company can fully benefit from opportunities provided through digitalization, only if the procurement personnel are digitally capable and have the ability to collaborate and build relationship with internal stakeholders as well as suppliers from diverse array of geographic and cultural backgrounds.

CPO’s should fundamentally rethink regarding their organization and people capabilities/ talent, both of which needs to be reshaped over time. Companies have to create new job profiles such as buyer for new categories, contract experts on intellectual property or data scientist for data maintenance, analysis and mining.

Talent

Given the need for Procurement function to reform their Talent, they must follow seven fundamental steps to transform and manage talent – Plan, Attract, Recruit, Assess, Develop, Retain and Transform.

Negotiation skills and market insight will continue to be the fundamental skills but TCO across product lifecycle, cost structure analysis and game theory will emerge as highly important skills in this field. The formula below is essentially going to be the driving force for the success in business today. People’s professional credentials will be measured by their ability to influence, persuade, and provide vision.

People + Passion = Prosperity
Mind-set must be strategic, global, collaborative and
above all, commercial.

Conclusion

Shifting the procurement team from tactical focus to strategic transformation can be a long journey for a company. But this journey can actually make the difference between company’s definite success or failure. There are several actions to be tackled in order for procurement to gain deep business insight, react quickly to the changing needs, drive higher overall value and improve stakeholder satisfaction. Investing in activities to elevate the role of Procurement within an organization, moving beyond the traditional role of gate keeper and cost hunter will definitely bring added value to the organization.

Procurement in Twenty 20 will mean developing new value propositions, meeting new business needs, and integrating data across functions. It will call for using data pro-actively and intelligently. Perhaps more importantly, it will require a fundamental reshape of Procurement organization and its capabilities to take on new challenges.

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