The challenge facing procurement in 2016

 In Blog

Is Contract Management the new black for the procurement profession?

Tim Cummins, CEO of IACCM, has been broadcasting the value of contract management to his growing readership for some time now, demonstrating the virtues of good contract management, but also the growing necessity of it. In this eSeries we share 10 of Tim Cummins blogs which help define and demonstrate this statement. Part 6, The challenge facing procurement in 2016 is below. Subscribe to our blog to receive the next installment directly to your inbox. 


PART 6

2016 presents continued pressure to deliver savings.

That statement summarises where many Procurement groups find themselves in 2016. So to the casual observer, nothing has changed.

Yet they would be wrong, because the expectations of top management in both public and private sector are shifting fast. They want supply chains that deliver sustained improvements in cost, quality and innovation, supporting flexible, market-oriented operational capabilities. And those attributes will not be achieved through traditional, supplier-focused demands for price reductions.

2016 will see continued erosion of old-style Procurement and growth of the skills and methods needed to manage category segments and integrated supply networks. Input-based acquisition will be replaced by effective commissioning and management of outputs and outcomes. “Procurement” will steadily shift from being a functional activity into an organisational competence.

So what is left?

The future – far from looking bleak – is simply different. It demands greater understanding of markets, closer integration of customer / supplier operations and shared commitments to performance. Those characteristics will be delivered through the adoption of contract management and supplier relationship management techniques, underpinned by heightened levels of commercial awareness.

To meet the challenges of 2016 and beyond, procurement must move from its narrow focus on short term savings. Practitioners of the future will exhibit cross-functional knowledge and stakeholder understanding, to ensure that savings are achieved throughout the lifecycle of a supply relationship and that they supplement – rather than undermine – the achievement of business value.

Perhaps the big question in all of this is whether these new attributes can ever emerge while Procurement reports to the CFO. The short-termism of financial thinking, combined with its limited understanding of business relationships and ethics, far too often drives destructive behavior by Procurement. The growing importance of overall supply management demands a shift in thinking and measurements – implying that an escape from the umbrella of Finance is a critical need.

 

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