The Procurement Value Proposition: The Rise of Supply Management – Preface

Preface

We see a new vantage point on modern business. One that highlights interrelationships between specific business units and the broader economic, social and market systems in which we all live.

The current view on business tightly restricts the business model within which an organization operates. Often short-term goals are the immediate focus. Business decisions seldom consider the power of supply side management and its impact on economic, social and environmental systems. Smart procurement in modern businesses can ensure that resources are in place to absorb the growing middle-class and consumer demand portended by globalization. Corporate decision makers also tend to overlook the destabilizing effects created by disparities in wealth and the corresponding inability of people to satisfy their fundamental needs – because of their corporation’s desire to continuously reduce cost. Today an alternative perspective on business is emerging. It is one that is informed by an understanding of the dynamics of modern business in global markets with global consumption.

In 2008 we held an executive summit with a group of CPOs from major UK businesses on the status of the supply base in light of the emerging financial crisis at that time. We found that there were significant challenges that existed in preserving the financial health of suppliers, and that firms weren’t really doing enough to try to support suppliers.

Since then things have actually worsened. In spite of this, when we met up again in 2012 we discussed some of the positive issues we saw for procurement, such as the increased importance and impact of the profession in a time when liquidity (the degree to which an asset or security can be bought or sold in the market without affecting the asset’s price) was low. The importance of good procurement practice had become critical: we saw the role of the supply management leader growing in organizations both in a strategic sense and in its centricity to organizational performance.

As supply management moves away from being a cost-reducer (only), it will play a much more important role in value-adding activity and influencing business strategy. This central involvement will become all the more important as major trends start to hit business and subsequently procurement, including increased corporate social responsibility, technological advances, global geopolitical and macroeconomic change, demographic changes, changes in supply and demand patterns and the shift in the economic centre of gravity from West to East. It was from this discussion in 2012 that the germ of an idea for this book was conceived.

The aim of this book is to contemplate the value proposition to the business of contemporary procurement and supply management. Business organizations are going through rapid external and internal organizational changes for the reasons given above.

Much of the foregoing points to the increased as well as changing nature of the risk we face in business today. That said, we must avoid risk becoming the responsibility of a few more or less isolated individuals within organizations; instead it is important that risk awareness becomes integrated into the fabric of the business: where all processes, including purchasing and supply chain management, should take into account the need for risk awareness.

Value and what it means is the key purchasing and supply chain management challenge we seek to address in this book. If purchasing and supply chain managers are to embrace this challenge they have to change the ways they operate. This requires new ways of thinking about supplystructures and processes, and new skills and competencies.

As a result, the very future of procurement – as a function within organizations, as a process that spans organizational boundaries and as a profession – raises important concerns for both organizations and the procurement practitioner. This book considers the practice of procurement and supply management in the modern era and how this might shape the next generation of procurement professionals.

The value proposition of procurement is examined in terms of its changing focus set against changes in business contexts, purchasing strategy, organizational structure, role and responsibility, system development and skills required to work in the profession. Consideration has been given, too, to geographical contexts and differences highlighted between the United States, the UK and China.

It is worth pointing out at this juncture that some of the ideas presented in this book have been kicking around for quite some time, although the conditions under which they might flourish have yet to materialize in more than a handful of organizations. The hope is that – with all that has been accomplished in procurement over the past few decades – the time for these ideas may finally be coming.

It follows from the above that the integration of procurement across the business is not the responsibility of a few but rather a challenge that must be embraced company-wide. You don’t have to be a ‘procurement convert’ to believe in the theme of this book – as the realization of value is not purely about the challenges of getting an enterprise to realize its economic potential, but also about a range of social and economic challenges outside the organization.

It is for this reason that the book is intended as a starting point for those interested in the future of procurement – a trigger to establish discussion and debate regarding procurement‘s value and stimulate future conversation about what the next generation of procurement practice might look like. We hope, too, that this book will play its small part not only in educating, but also changing the mindsets of current and future purchasing and supply chain management professionals.

Gerard Chick MSc
Chief Knowledge Officer
Optimum Procurement Group

Robert B Handfield PhD
Bank of America University Distinguished Professor of Supply Chain Management,
North Carolina State University
Director of the Supply Chain Resource Cooperative