“Procurement needs to embrace agility in 2018”, argues Guy Strafford, Executive Vice President: Market Engagement at Proxima. Much like Top Gun’s Maverick and Goose, procurement will have a “need for speed” in 2018. Your CEO is worrying about speed and agility, so you should be worrying about it too.
AI, big data and digital are evocative concepts, but they are agents – at various stages of progress – of a bigger force: the desire to accelerate change. The next year will not be about how to deploy these nascent technologies, but rather about something more fundamental: how CPOs respond to the desire to move faster.
Let’s face it, speed is not an attribute often associated with the procurement profession. Because of the perceived need for ‘seven-stage sourcing cycles’, procurement can be a highly process-oriented, administratively-driven opponent to speed.
The CEO, however, has different priorities. Responsible for top-line growth, executing tasks with vigour, reacting to competitive pressures and real-time changes in markets, CEOs may not always be most concerned with the procurement team’s ability to scour the globe for the cheapest possible supplier. In my experience, the CEO’s greatest frustration is watching how long it takes for decisions to convert into delivery. Thus, they will value a procurement team that is agile, nimble and can respond quickly to immediate needs. Speed of response is the new competitive edge.
With this in mind, it is fair to question the placement of procurement in today’s organisation, when senior leadership pulls it in different directions, depending on whom it reports to. Since so much of an organisation’s costs are directed to external suppliers, the implementation of the CEO’s vision – or directive – at pace, is likely to be executed by suppliers anyway. It, therefore, stands to reason that procurement will have greater engagement with CEOs.
That being said, a change in dynamic will necessitate a significant paradigm shift. Procurement teams will need to demonstrate the ability to respond quickly, react vigorously and shed many old stereotypes. For example, insight needs to be available all the time, not just after a RFI.
In progressive companies across industries – from financial to consumer products – we are seeing tangible evidence that this craving for speed is changing the way in which procurement interacts in the organisation and where procurement leaders and teams are positioned in the organisational chart. With this in mind, 2018 could hold the following:
CPO meet CEO
We are seeing more and more examples of CPOs reporting directly to CEOs in industries where this reporting structure has rarely been seen. It is early days, but, just recently, two prominent companies with whom we work have undergone this reporting transformation. We will surely see more of this.
The months-long RFI process is getting either massively shortened or done away with altogether. Why? Speed. Internal procurement leaders are expected to stay attuned to market trends and opportunities in real time by accessing data and relying more heavily on specialist supplier intelligence. There is no time for extended information-gathering projects.
Big suppliers will be replaced by smaller, more nimble ones
Across industries, companies are supplier shopping, unafraid to unseat legacy suppliers in favour of smaller ones: suppliers that are nimbler, and perhaps more motivated, are able to meet the organisation’s needs with greater speed and agility.
Hello commercial supplier management
Rather than leave vendor management to haphazard business practices, procurement is seizing the opportunity to make suppliers move faster, thereby bringing transparency to supplier performance and risk across their business.