Last year a significant number of organisations were ‘transforming’ their procurement capability. In the main, these programmes had to reduce or replace procurement staff, cut supplier costs and improve the company’s appreciation of procurement as a capability.
What seems to be missing is a rock solid mandate to comply with procurement’s policies to make these changes and produce sustainable benefits.
In 2015, organisations must get serious and establish mandates around procurement activities (like HR and finance do) with serious consequences for non-compliance; only then will there be a systemic cultural change in attitude towards procurement and a full realisation of the benefits it can deliver.
Due to market pressures and the high cost of labour in Australia, more and more organisations have either sourced or are planning to source goods and services from lower cost countries. This may result in organisations trading with developing countries that have vastly different business practices, employment conditions, legal systems and risk profiles to Australia.
Procurement will need to bring in experts and/or train current staff if they are to fully realise the benefits of transacting abroad while avoiding potential public relations, legal, operational or other risks. Procurement also needs to develop contingencies for their business critical goods and services in the event the supply chain is disrupted.
Following a number of years of serious cost cutting, organisations will have to find more creative ways of improving their growth and margin. Procurement is positioned perfectly to facilitate a far greater collaborative and innovative relationship with suppliers. In addition to normal business intelligence, the procurement specialist will need to become a truly trusted partner within the business and be intimately familiar with the organisation’s strategy, challenges, opportunities, competition, stakeholders and customers. Supplier innovations might come from shared research and development initiatives, ‘mutual value discovery’ days or joint collaborations with selected universities. Organisations who continue to view their strategic suppliers with suspicion are either operating in the dark ages or are doing business with the wrong suppliers.
by Billie Gorman – procurement executive and a CIPS Fellow