BEE – a system that could end ‘lazy’ purchasing

Great intelligence is required to create possibilities to optimise supply chains within the rules of black economic empowerment (BEE), Gerd Kerkhoff, CEO of purchasing consultancy Kerkhoff Consulting, told SmartProcurement.

Kerkhoff Consulting is a recognised leader in purchasing optimisation with over 500 clients worldwide.

“If you don’t break-open rules that govern or restrict purchasing activity they can corrupt professionals and make them lazy,” said Kerkhoff.

Speaking at the Southern African-German Chamber of Commerce in late June, Kerkhoff welcomed the need for intelligent purchasing in applying the requirements of transformation and BEE.

“If more organisations insist on bright and intelligent purchasing staff it will be the end of ‘the average among us’ being tasked with spending most of the money”, noted Kerkhoff.

Procurement strategy is at the cutting edge of the factors that affect the commercial success of businesses

BEE in the South African context can be counted among other mega-trends that will shape the future of contemporary purchasing strategies:

1. Purchasing as a control function

Outspoken management expert Tom Peters, once called Purchasing Managers the “Rock Stars” of business. Purchasing’s role is no longer to simply place orders; it needs to ask, “why do you need it?” Make-or-buy decisions will be dictated by purchasing policy.

Purchasing will be empowered through greater transparency with tools such as cost break-down and through innovation (recruited in-house or externally through skilled providers), which has become an important success factor.

Shorter intervals between changes in customer behaviour lead to challenges and new opportunities for world class purchasing practises. To respond rapidly a supply chain must be integrated, flexible and have highly trained personnel, said Kerkhoff.

2. Sustainability in procurement

“Green procurement was still a fuzzy buzzword only three years ago. It is now considered an important competitive advantage by over 50% of respondents in a recent survey conducted by the Kerkhoff Competence Centre of Supply Chain Management in Germany.”

Consumers’ preference for healthy and sustainable products and services is forcing purchasing departments to deal with this issue right down to tier two or tier three suppliers.

Similarly, a greater focus on sustainable supply chains – longer influences and lasting results – has given risk management new direction and status, particularly with regard to advanced purchasing practises.

3. Battle for energy and scarce raw materials

The cost of energy as a proportion of an organisation’s overall costs is increasing steadily.

“This is currently the most important trend, according to a food industry survey conducted in October 2009. It influences every buyer,” said Kerkhoff.

The BRIC countries (Brazil, Russia, India and China) display a disproportionately high and rising demand for energy and raw materials, thereby exacerbating international competition.

Competitive advantages through new, innovative products and transparent markets are becoming increasingly important in the global commodities trade.

4. Competition for talent

“The era of the purchaser as a processor of orders is ending. The need for intelligent, bright and highly trained purchasing staff is increasing rapidly. The consequence of which is that well-trained purchasers are becoming an increasingly scarce resource.”

A lack of talent management in purchasing departments further leads to organisations creating their own shortages and unnecessary pressure on margins, said Kerkhoff.

Furthermore, the professional profile of the Purchaser is ever changing owed to the increasing influence of finance, issues of sustainability and the commoditisation of the Purchasing function.

However, these mega-trends are not insulated or independent of each other; “the number and degree of interlinkage between these trends is on the increase; and it is likely, if not essential, that Purchasing is made responsible for the early identification of the direction that these trends will take in the future. This requires additional skill sets and regular training for your procurement expertise” concluded Kerkhoff.

For more information on Kerkhoff Consulting’s services, contact Rethink Management Consulting

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