Sourcing is what the procurement function does, right? But the times are changing and the things that procurement should be sourcing are evolving, fast.
The traditional objectives and performance criteria for procurement are still there :
- contract coverage and compliance
- total cost of ownership optimisation
- efficient procure-to-pay process
- innovation to deliver value
Yet a whole new set of objectives are now on the horizon for the Chief Sourcing Officer.
As the digital revolution continues to generate new solutions and service offerings, procurement must play a larger role in sourcing these opportunities. The task is of strategic importance yet highly sensitive. Instead of buying what end-users say they need, procurement must now identify, and source, what end-users don’t realise they need (or don’t even want… )
Robotisation is the prime example.
RPA (Robotisation and Process Automation) offers solutions that can radically improve efficiencies in Finance and Accounting. Improved process reliability but more importantly headcount reductions of over 50% are standard. Are Financial directors going to spontaneously suggest that such solutions be implemented? Does it have to be the prescient General Manager who takes the lead? What other function could initiate such innovative, groundbreaking strategies?
Procurement should be doing this. As the only function whose role includes searching through market offerings to source innovative, performance generating opportunities, procurement must take the lead on these developments.
There is a similar situation concerning the Internet of Things, and the impact those solutions can have on maintenance; moving towards predictive maintenance and concepts that may be quite new to the MRO team. Again, someone has to be able to demonstrate the value creation potential to operational teams in charge of maintenance.
There is clearly a question on rank and position in the company hierarchy here. The Purchasing Manager who sits down in rank 3 or 4 in the organisation is not going to be credible on these issues. Procurement managers have been complaining for years that they should be higher up in the pecking order – now the time has come for them to claim their rightful place.
Most of these opportunities are in spend categories that have not been the priority – the most effective procurement actions have been in production. Company and process efficiency gains are rapidly becoming the new priority for leading procurement organisations.