The Evolution of Procurement: From Tactics to Strategies

25 years as a leader in strategic sourcing provides a unique vantage point.  Source One’s procurement experts have both witnessed and inspired monumental shifts in the nature of their business.  While our diverse offerings still set us apart, we were practically an anomaly in the early days.  Just a decade ago, most of the purchasing groups we encountered were purely reactive; they employed age old tactics, and relied on 'conventional wisdom.'  Procurement and purchasing were more or less synonymous.  So long as stockrooms stayed stocked, there was little cause for concern.  Even many of our larger clients lacked the structures and resources for sourcing indirect spend items or accurately assessing risk.  A number of Source One's veterans can recall explaining the very idea of strategic purchasing.

Persuading clients to abandon the ease of the three-bid process and the comfort of preferred supplier relationships was no small feat.  After all, bad or inefficient purchasing habits are just that – habits.  The worst ones are never easy to break.  What’s more, cost reduction can make people uncomfortable.  Reduced budgets often conjure images of inferior products and subpar services.  Even seasoned Procurement professionals still face friction during early discussions.  This continues to ring especially true during collaborations with areas like IT and Telecom for whom Procurement can look especially unfamiliar.

Reducing costs is still a key objective for Procurement groups.  The best, however, know that their advisory role must go well beyond savings considerations.  Locating the right suppliers and markets for our clients depends upon our ability to establish, nurture, and maintain amicable relationships.  Strict budget policing encourages the exact opposite sort of partnership.  Focusing on costs not only inspires resentment, but undersells Procurement’s considerable potential for shaping a business’strategy. 

In its newest iteration, Strategic Sourcing is increasingly linked to category management.  Successful organizations appoint sourcing leads to oversee particular departments (IT, Marketing, etc.) or spend categories (Telecommunications, MRO, etc.).  Dedicated subject matter experts do much to inspire meaningful collaboration between business units.  Working across organizations, Procurement teams can better gain a comprehensive understanding of stakeholder needs and deliver results that can profoundly reshape an entire enterprise.  Though these changes are still very much underway, Procurement's new role in negotiations suggests more change to come.  

Tomorrow's Procurement organizations cannot hope to reach best-in-class status without further developing management skills and building credibility across businesses.  Simply put, many companies retain internal structures that could discourage Procurement from fulfilling its potential.  Successful procurement departments will navigate corporate politics and continually emphasize the broader implications of the word 'savings.'  As always, some Procurement groups will drive these changes while others watch from afar.  Count on Source One strategic sourcing specialists to remain the former.