adr international Procurement consultants

Getting it right for the future

Rapidly changing world economic conditions are bringing big challenges for procurement people, says Robin Jackson

Recent events have seen dramatic and unprecedented developments in the world economy. And it looks like this is just the beginning. For procurement people, this is a time of great challenge - and great opportunity.

I've been in procurement more than 30 years in a variety of industries, and I've seen some big changes in that time. But we're now facing the biggest challenges we've ever known.

As many people will recognise, 30 years ago procurement was little more than a functional activity with a focus on saving money. But fundamental reforms in the political and economic strategies followed by leading nations including the US and the UK led to world markets being freed up.

This sparked the trend for strategic sourcing in companies, which in turn led to the rise of low-cost country sourcing. This has meant that procurement has become a much more strategic function in many companies, with much bigger challenges and responsibilities.

Now we live in a globalised world with countries including Brazil, Russia, India and particularly China - drawing in huge volumes of skills and commodities. This, exacerbated by recent turmoil in the US economy which has sparked a global economic crisis, has fundamentally affected international relations.

At the same time there has been a steadily increasing focus on the environment and ethical supply chains. Pressure from consumer’s means companies can no longer afford to be complacent about their reputation.
They have to make sure as far as possible that people who are working for them along the supply chain are being treated well. And they need to take steps to minimise damage to the environment.

Globalisation has also brought the need to pay attention to the risks inherent in operating long and vulnerable supply chains across the world.

All this, coupled with the uncertainty we now face in world markets, means that procurement is now a far more strategic function with much bigger challenges and responsibilities.

The crucial factor for successful procurement operations now is skills. This means not only expert skills in procurement but also, for example, understanding cultural differences and having some knowledge of languages such as Spanish, Russian or Cantonese.

Procurement people nowadays need to understand world economics.

And of course they should be proficient in the various branches of mathematics that have an impact on our activities. Procurement leaders must ensure their organisations are arranged in the best way to operate effectively. What this means will depend on circumstances.

The key issue is getting the balance between the centre and the rest of the organisation right. Outsourcing if at least some procurement activities is increasingly an option.

The emphasis on protecting the environment means procurement people will increasingly have to account for the environmental impact of their operations.

Nevertheless, despite all the challenges we face, this is a good time for procurement leaders. We are taken far more seriously nowadays than in the past. We're better equipped to deal with the challenges in terms of skills, technology and resources.

The economics of the new world will force procurement leaders to play an increasingly crucial role in business and in the public sector. Now is the time to rise to the challenges and turn them into opportunities.

Download PDF here