Future of Procurement Study Available

I recently completed a study of 25 CPO’s, each providing their view of what procurement will look like in 2025.  You can download the full report at this link.

Procurement has a history that is linked in the core concepts of centralization, volume leveraging, and cost reduction.  The earliest traces of this can be linked to materials management.  Charles Babbage’s book on the economy of machinery and manufacturers, published in 1832, referred to the importance of the purchasing function. Babbage alluded to a central officer responsible for several different functions in the mining sector: “a materials man who selects, purchases, receives, and delivers all articles required.”[i]  By 1866, the Pennsylvania Railroad had given the purchasing function departmental status, under the title of Supplying Department. The purchasing function was such a major contributor to the performance of the organization that the chief purchasing manager had top managerial status.[ii]

The Comptroller of the Chicago and Northwestern Railroad wrote the first book exclusively about the purchasing function, The Handling of Railway Supplies—Their Purchase and Disposition, in 1887. He discussed purchasing issues that are still critical today, including the need for technical expertise in purchasing agents along with the need to centralize the purchasing department under one individual.  The author also commented on the lack of attention given to the selection of personnel to fill the position of purchasing agent.

These early insights dating back to the early roots of procurement evoke a situation that is still not uncommon to what we see today.  Although procurement has certainly evolved from its early roots, it still faces challenges in terms of executive recognition, talent management, and organizational challenges.  Modern enterprises are faced with a massive new set of challenges, including the forces of globalization, increased risk, complex supply chains, and the spread of government regulation on decision-making, not to mention the tremendous strain of man’s presence on the earth’s natural resources.  This white paper will seek to document not only what the future holds in store for the materials man (or the buying woman!”) but also how this role is likely to emerge as critical to the future.

Indeed, our central thesis is that those organizations who are better able to position procurement as a core business function, with direct responsibility to the CEO, will be able to drive a more competitive lever for change, and adopt more readily to the rapid forces of change in the current global environment.   These organizations who embrace complexity and manage it through more rapid responses, improved market intelligence, greater adoption and translation for internal stakeholder requirements, and adaptive capabilities will survive, just as Charles Darwin identified organisms that were better able to adapt to their environment ultimately survived.  We characterize this capability in what we describe as the FUTUREBUY organization.  This report depicts what FUTUREBUY will look like and how we expect this evolution to occur.