I’ve had two conversations with clients around procurement in recent times which I wanted to share with you. The first one included a remark from a client which struck me to such a degree that I wrote it down precisely. ‘Our procurement process actively discriminates against smaller firms because of the perception that they offer limited services’ were his precise words. The second was with a procurement professional who told me that his brief was simple…to buy services at the best possible price. When I asked him about quality, his comment was equally simple…’that aspect is not part of my brief.’
It’s hard to form an argument on the basis of two interactions and you would be right to question its validity. However there are some trends around procurement which I want to explore in this blog:
- For most larger multinationals, the procurement function has been established for at least 10 years now. In many cases, the function started as a data gathering activity to understand the spend of the organisation. Since then it has evolved to act as a layer of good corporate governance, protecting the organisation from perceived poor or even illegal buying behaviours. That remains its primary function.
- For many businesses, procurement has started to become a source of value creation…the ability to use spending power as a point of negotiation around price is becoming mainstream.
- The second driver for the function would appear to be greater efficiency…which roughly translates as reducing the ‘tail’ of suppliers who are ‘procurable’. This, by its very nature, leads to an orientation to ‘one stop shopping’.
Its the latter which causes me some issues. Much as our personal buying decisions in the west and to some extent in Asia are increasingly oriented to provenance, ie an understanding of the source beyond the supermarket / retailer whom we choose to visit, the ‘source’ in a consulting sense is quite simple…it’s people, their experience and their ability to operate within your environment.
As an old buyer from the retail world once told me most memorably, ‘ we’re going to beat the hell out of the big ones and encourage the little ones…that results in the best deal and the best quality…one without the other is entirely pointless’.
In no part of our buying lives do we look at price in the absence of quality. Lets not start in the world of work.