Interview with Supply Chain Management Review on our new book

Bob Trebilcock, the editor of the Supply Chain Management Review, interviewed me and my co-author Gerard Chick on our new book “Procurement’s Value Proposition”.  Here’s an excerpt from the interview.

SCMR:  The role of the Chief Procurement Officer is becoming more strategic and even more important as procurement is affected by technological advances, changing demographics, geo-political and macro-economic change, and an increased focus on sustainability and Corporate Social Responsibility. In The Procurement Value Proposition, Gerard Chick and Robert Handfield consider how these global economic changes will alter purchasing strategies, organizational structure, role and responsibility, system development, and the skills required to work in the profession. I recently had a chance to speak with Chick and Handfield about their book. You can read an excerpt on SCMR.com.

SCMR: Gerard and Rob. Thanks for speaking with me. First, tell us a little about the book and how procurement is changing. It’s no longer just about purchasing, correct?

Handfield: We argue that there is an evolution of procurement as a true value added business function. For a long time, procurement was boxed into a corner. Its role was viewed within the organization as negotiating to get better prices. Even today, in many organizations procurement is still about leveraging the spend to get quantity discounts and lower costs. However, given sustainability mandates, supply chain risks, and the huge amount of volatility in business today, procurement has to be different now. One of the trends we’re seeing is that the real savings often occurs after the contract is signed by looking at the total cost of ownership, which can include the end-to-end supply chain costs. The question is: Who leads that? Is it supply chain management or is it supply management? It could be different depending on the organization, but you have to bring them together. We think there is an opportunity for procurement in that change. But, in order for procurement to lead and get a seat at the table, it has to demonstrate a business case. It has to be a value added function.

Chick: One of the things you’ll see in the book is a formula related to procurement and profit. I’ve had procurement people tell me that procurement isn’t strategic; they just go out and do deals. But, the cost of purchased goods impacts profit so it must be strategic because the business is there to make profit. Secondly, value is a word that people bandy about today. The way I approach it is that value is the utility you derive from a good or service. If procurement works well in an oil and gas company so that they don’t have rigs producing the wrong crude then procurement is adding value because it is ensuring that through its work, the company is creating the petrol people need for their cars, it’ll be the right quality, and they’ll be paying the right price. They’re valued by the effectiveness they bring to the company. They’re not just buyers cutting deals. They are aligned with what the company wants to achieve. That’s value.

Read more of the interview on the SCMR website.