Reinventing procurement: the case for new operating models

MatthiasGutsmann_New_86.jpegIn late July, Digital Procurement World (DPW) brought together some of the world’s most progressive chief procurement officers (CPOs) for a virtual roundtable discussion on how the ever-changing digital environment can help procurement challenge the status quo and design operating models that deliver both innovation and value.

Matthias Gutzmann, Founder of DPW, gives us the key takeaways from this discussion:

#1: Agility is important, but it is not everything
‘Agile’ is a word that appears time and time again in discussions around the future of procurement. But while it is clearly critical that procurement organisations have the capability to respond quickly and effectively to the world around them, there is also a sense that any future operating model needs to be based on something more solid. As one CPO in the discussion succinctly put it: “I strongly believe that a procurement department should partly have a solid foundation and backbone on which it can rely, which is repetitive, which is consistent, which is delivering and efficient”. In other words, yes, every procurement organisation should strive to be as agile as possible, both now and in the future, but it is also essential that the reasons behind any move to a different operating model need to be fully understood. Having the sole intention of embracing agility is not enough on its own. It has to be purpose-driven.

#2: ‘Buyers’ are history
In days gone by, procurement was seen by other areas of the business as being transaction focussed. In fact, that was viewed as their one and only focus. What is clear, as we move through 2020 and the uncertain landscape that lies beyond, is that this conventional role will no longer exist. “We don’t need buyers anymore”, said one of our attendees. “Buyers are history.” Instead, what those who work in procurement and who operate in this new digital environment need to be is network makers and network managers. However, underestimating the impact that people can have would be a huge mistake. As one CPO said: “The technology component of customer relationship management – that can be as advanced as you want it to be, but you need to have the capabilities to support it … we need to continuously evolve the capabilities within procurement”. Buyers are no more, but the skill-sets of those working in procurement have never been so important.

#3: Look outside for new talent
To fuel innovation and to create value for stakeholders, it is essential that procurement organisations of the future reflect the environment that they are operating in. And this means recruiting intelligently. “You want to have a certain amount of new skill-sets coming in and absolutely need to be fishing in a lot of different ponds”, said one leading figure. Others said that they were now actively looking to bring people into procurement from agencies, from the commercial side of business and from finance. That is not to say that core procurement skills are not also important, it is just that they need to be complemented with broader skills from elsewhere. A combination neatly summed up in this quote: “You need some people with the functional skill-sets that can help train and teach – the balance between the two, I think, is where you get a lot of the magic”. You cannot just wave a wand and create a value-creating procurement organisation – but you can certainly think outside of the box to make it more likely.

#4: Futureproof technology to help navigate risk
As 2020 is proving, risk is omnipresent and when an unpredictable event like COVID-19 comes around, it does not have boundaries. Which is why it is essential that your operating models and associated technologies do not just provide you with the information that you need to thrive today – but also tell you where opportunities and risks lie in the future. “What we are looking for are some digital solutions that not only bring us benefits now by allowing us to look back in terms of performance and tracking, but also provide real-time data that helps us look to the future – what are the open liabilities, what are the open precious orders”, said one of our participants. If the events of this year have taught us anything, it is that the future is more uncertain than ever. That is a fact that businesses have always had to cope with, but being prepared for any situation has never been so important.

#5: Take your suppliers with you
No transformation is going to be complete without collaboration – and it is essential that the relationship between procurement and its suppliers is one based on mutual trust. And, if anything, the current crisis has already gone a long way to hastening a more collaborative mindset. “The amount of collaboration is astonishing, as is just how quickly things are starting to happen”, said a roundtable member. That has been one of the hugely noticeable elements of the lockdown – the way that people are working across collaborative platforms and it is not just those who were tech-savvy before that are benefitting. The key now is to ensure that that continues in the future and that communication channels remain as open as possible.

#6: Do not overlook start-ups
There are thousands of procurement start-ups now operating in an increasingly complex and congested marketplace. But ignore them at your peril because they can deliver what a lot of much larger companies cannot. It requires an entirely different mindset, though, as one of our contributors outlined: “Often procurement is the impediment to innovation … here is a start-up, come and work with us as a start-up, and here is a 30-page non-disclosure agreement … you completely overwhelm the innovation you are trying to create”. It is, therefore, essential that procurement creates an environment where start-ups and procurement can work hand-in-hand. “It is this entrepreneurial mindset”, said one senior procurement figure. “Instead of thinking about a process and violating a process, it is about thinking about the opportunity and how it would be possible to maximise it without following that process.” A growth mentality – one that procurement would do well to embrace.

Digital Procurement World

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