direction.jpgMichael Porter developed his well known Value Chain Model in 1985, in which he asserted that procurement was a support activity – an exercise that aided inbound and outbound logistics, operations, marketing and the provision of services to generate profit for an enterprise. Although the model has relevance today, procurement has come a long way since the rather simple reciprocal reaction of ‘buying’, says Dr Myles Wakeham, Senior Lecturer and Researcher at the Cape Peninsula University of Technology.

It has, indeed, migrated to strategic sourcing because of the dictates of market forces and the natural progression that most organisational activities and functional areas undergo as a result of the shift of organisational focus to customer centrism. Therefore, the buying (‘procurement’) that Michael Porter referred to in his Value Chain Model has progressed post-1985 to purchasing, then to procurement and now to strategic sourcing… certainly not a support function as argued by Porter during the 1980s. The question to ask in the contemporary context is then, where does strategic sourcing journey to from here and, even more importantly, what challenges lie ahead for this vital strategic, value-adding and profit-generating function?

 

Myles_Wakeham.jpgStrategic sourcing’s primary challenge lay in the mindset of procurement officials, says Wakeham: the belief that they and their function have a lack of importance (an inferiority complex if you will) as they are still convinced that strategic sourcing/procurement is a second-order activity and not a primary, integrated strategic process. Therefore, the challenge lies in positioning the activity in the collective minds of procurement professionals/officers, other functional area managers and employees, senior management and external stakeholders, as one that is strategic in nature and thus deserves to be placed higher in the hierarchy of an organisation. For that reason, the importance of procurement/strategic sourcing needs to be ‘marketed’ towards the top of the organisational structure and, equally important, to the inside and outside of the organisation and its supply chain. It is Wakeham’s belief that procurement officials are their own worst enemy as they do not understand their true value and, consequently, tend to underestimate (or not fully comprehend) their contribution to the organisation’s success and profitability, and as relevant to the South African economy.

Continue reading on SmartProcurement Review online.