Thinking About the Future Role of Procurement/Purchasing/Supply
The field of supply management has undergone quite a few changes over the past several years. Leaders in the field are always thinking about what the future of procurement will look like. There is even some confusion about what to call it: Procurement? Purchasing? Supply Management? Does it matter?
In view of this, I was happy to share some of my insights on what the world of Supply Management (let’s stick with that) is about today, and where it is headed (in my humble opinion).
To begin with, I think the lengthy debate terms Purchasing, Procurement, Supply Management, etc. are not important. What is important in my mind is how people think about the entire function. For many years, ISM was called the “National Association of Purchasing Management”, then moved to “Institute of Supply Management”. The rationale in this case was that “Supply Management” was “more professional-sounding” than “Purchasing”.
But what are the boundaries of “Supply”? Based on the research I’ve done on supply chain best practices, Supply fits into the Supply Chain Operating Reference Model as another chunk of the “end to end supply chain” – with the emphasis on being an integrated component of this chain. In my research, I’ve modified the SCOR model to include these six core supply chain processes: DESIGN, SOURCE, MAKE, DELIVER, SELL, SERVICE. Along each of these dimensions, organizations need to think about how these processes are governed, the analytics that drive them, the contract management and collaborative relationships that exist, the risk management and intelligence used to inform strategies, and the operational enablers (Leadership, Talent, Systems) that drive them. And oh by the way, they need to be thinking about how sustainability issues tie these together.
For instance, is supply management working with design teams on developing target cost, and total life cycle cost models, that consider the product life cycle attributes? Are they bringing supplier technologies to the table? Are they coordinating with logistics on inbound and outbound models to truly optimize transportation, warehousing, and packaging? Are they collaborating with marketing as they move into emerging countries, to establish a local supply base to feed local production that is truly competitive? As they move into BRIC countries, is supply working to find suppliers in their supply chain adopting environmentally friendly practices, and are they complying with labor and human rights issues? Are they managing supply risk, to understand their impact on production facilities, to avoid supply disruption? And are they managing contracts in such a way that stakeholders needs are being truly well-represented, and managing change over the life of these contracts?
When viewed in this light, Supply Management clearly fits into the SOURCE process – but with an emphasis on integration with the other five elements of the end to end supply chain. That is, supply managers need to get out of their “low price” mentality, and begin to engage with other parties in the end to end supply chain to begin identifying how best to align and develop suppliers that align with each of their internal functions, as well as how to facilitate this dialogue and collaboration.
This is where ISM’s sweet spot lies – in helping to get people in supply management to break out of their shells, and think differently about how they operate in this environment. This isn’t about Purchase Orders, RFQ’s, bidding, or audits. In my mind, procurement, supply, purchasing, or whatever you want to call it, has a LONG way to go before they can claim to be world class in these dimensions in just about every organization I’ve seen lately.
