Despite procurement’s traditional ‘cost-cutting’ reputation, success in supply chain sourcing is about far more than driving down price.
From procurement specialists with an understanding of AI and business performance data, to suppliers that are bought into a business’ ethical stance, strategic sourcing has a key role to play in an organisation’s overall success.
This has taken procurement from a transactional function to one intended to add commercial value across the entire organisation. Tasked with delivering constant improvement and innovation, managing risk and reputation, while adding competitive advantage, strategic sourcing in the supply chain makes procurement a much more complex and multi-faceted ‘business function’ that it may previously have been seen.
Driving change through data
Across sectors, digitisation is driving change, with procurement being no exception. The procurement team is granted a new asset in the form of supply chain data – and, as a result, is increasingly empowered to steer business strategy and add value.
The advent of AI, robotics and automation allows procurement departments to analyse performance information more efficiently, more effectively and with greater visibility. Take the recent news that Nestle will pilot blockchain to track its product sourcing data and feed it directly to customers – tracing the milk production figures, for example, from the farms in New Zealand to warehouses in the Middle East. With global information such as this at their fingertips, procurement is able to offer greater credibility and transparency than ever before.
Conversations can now be supported by up-to-the-minute data on business-critical issues, backed by the comprehensive evidence that has traditionally been a challenge for any team to collate across complex organisations.
However, without the right leadership team in place to analyse and interpret, data is meaningless. Savvy businesses are seeking diverse talent, looking for leaders ready to challenge the supply chain status quo and secure competitive advantage through optimal use of technology.
Changing skillsets & new talent sources
Whilst the core skills will always remain, the most progressive organisations are now seeking analytical and IT skills, along with more commercially-inquisitive candidates who can and want to understand the strategic impact of value-adding procurement. This opens up new, innovative and often leftfield sources from which to seek leadership talent – not just from traditional overlapping functions like sales.
The journey from commercial project manager to procurement is one example of leaders jumping between functions to meet strategic sourcing requirements – drawing on analytical and commercial skills, alongside experience of dealing with different business cultures and departments.
Exemplifying the trend is Tom Rae, Group Director of Purchasing & Supply Chain at JCB and a member of CIPS Procurement Power List 2019. After starting in procurement, he moved into a number of General Manager roles across engineering and manufacturing, before returning to the sector. This arguably gave him the opportunity to gain wider commercial and strategic exposure than somebody who spent their entire career in procurement.
Similarly, businesses are increasingly seeking IT expertise to maximise the value of data, to improve forecasting and long-term business planning. IT leaders with data manipulation skills are now likely to make the move into procurement, as it provides a platform for those who are more interested in adding commercial value through innovation than fixing hardware issues.
As well as requiring a wider variety of career paths from their senior teams, leaders looking to keep the supply chain competitive are seeking talent that is ready to bring a fresh approach and update processes. Take the increasing trend for public sector bodies, for example NHS Trusts, looking to improve effectiveness and efficiency by recruiting commercially-minded individuals from the private sector. As sourcing for the supply chain is brought to the front-end of the business, procurement decision-makers appointing effectively are casting the net wider and looking outside the box for an updated leadership mould.
A partnership approach
The new breed of procurement talent is able to recognise that the modern consumer demands more than simply competitive prices. A series of high-profile business trust issues mean customers are more switched on to the environmental, ethical and social responsibility of their chosen brands – and this, in turn, has highlighted the importance of a sustainable supply chain to minimise business risk.
Strategic sourcing plays a crucial role here, which is driving another evolution - this time towards a partnership approach in supplier relationships. Successful leadership now involves looking at suppliers as not just a provider of goods or services, but as a fundamental part of their own business.
As a result, the new breed of leaders will use emotional intelligence and strategic nous to form a collaborative relationship with suppliers – ensuring they have an understanding, a view, and in some cases an investment, in the future of the business as a whole. Greater engagement inevitably delivers greater results – you only have to look at Carillion to see what businesses stand to lose if they do not evolve in this way.
As a result, it is becoming increasingly important for Chief Procurement Officers to build a culture of innovation and investigation within their department – one which considers all possible suppliers, irrespective of size or spend history, in order to find and cement relationships with the right ‘partners’.
This marks another shift away from the rigid procurement profile of a hard-nosed negotiator we could have expected to see in previous years. To fully tap the potential of strategic sourcing, leaders must have a broader skills base than in previous years – looking beyond cold-hard cash to the bigger procurement picture.