Recent decades have seen organisations become increasingly reliant on external suppliers. Today, many organisations spend a significant proportion of their turnover with suppliers - in some cases in excess of 50%.
Focusing on delivering the ‘core’ has become a key tenet of many corporate strategies. Deploy the best internal resources to deliver the most critical - deliver around your top priorities and use suppliers to help with the rest. Over time, suppliers have become critical to most organisation’s ability to deliver both business as usual activities and more complex, time critical transformational programs.
But is this the limit of how suppliers can help and drive value? Some progressive organisations are looking beyond the box that suppliers are traditionally put in. They are pushing the boundaries of where suppliers could and should play. They are awake to the fact that suppliers are a source of significant competitive advantage.
At the same time supplier markets are growing more complex and traditional linear approaches to ‘sourcing’ are no longer optimal, and often completely ineffective.
- It’s more complex... often multiple suppliers are required when previously one would do.
- Transactional approaches are less relevant... organisations historically have relied on ‘power’ and ‘leverage’ to achieve the best commercial outcomes.
- The edges and boundaries between organisations and suppliers have blurred... products and services are increasingly differentiated and bespoke. The decision-making process for which supplier to use now often needs to start at the very beginning. At the beginning of the sales and marketing strategy development, when new product lines are being considered, when significant business strategy changes are being planned.
- Suppliers have more choice, especially those at the leading edge are much more rigorous in qualifying who they want to work with. Are core values aligned, is there mutual trust...do we want to work with these people? Procurement needs to attract the best suppliers, ‘selection’ is no longer the name of the game!
So what does this mean for Procurement?
A new skillset is required across organisations. One that doesn’t quite exist yet, one that doesn’t need to rely on earning a seat at the table by making savings. It’s certainly an opportunity, to create something that feels different, that redefines value, and makes a tremendous contribution at the heart of the business.
With operating models undergoing significant change as a result of digital technologies, it is inevitable that this new way of relating to the unlimited capability that sits outside the boundaries of an organisation will change. Will existing Procurement teams be able to pivot fast enough to take the reins? Or will existing Procurement teams succumb to the temptation not to step outside their comfort zones, and inevitably face extinction.
The value that Procurement could deliver for organisations has never been so big. The regret of missing this opportunity will be even bigger.
Perhaps it’s also an opportunity to look beyond the P word.