Procurement Intelligence Unit

Jonathan - your point is well taken. While there has been tremendous progress in procurement over the past decade, we are still the tree that falls in the forest and is never heard. As a profession we must figure out how to better market our success. In order to further expand our reach we will have to develop sales and marketing skills within procurement.

I think we're seeing in NZ how it is possible to move procurement into the foreground. It does require an element of 'rebranding'.

I think we're seeing in NZ how it is possible to move procurement into the foreground. It does require an element of 'rebranding'.

history has had it that way for years and practitioners have been willing. for the pivotal role it plays in organisations, change can be over night

As I have mentioned in other forums, I believe that within any organization, regardless of what type, there are 3 basic fundamentals; 1) The physical structure, 2) the core activities and, 3) the web of administration intertwined within the two. Procurement being that of administrations. It is neither back of house or front of house but an activity within both core and non core operations. What corporate has done was remove this activity to make it department of its own, and with good reason. But, by doing so, they have removed the accountability measure from respective department heads. When you remove responsibility and accountability, you also remove efficiency. Corporate focuses on numbers but the internal organization needs to focus on process, increasing responsibilities and accountability because this is the only way to achieve effective efficiencies. By doing so, you can then go back to corporate and feed them the necessary and concrete information by which they can then base their decisions.

Jonathan, great topic. In my experience, organizations that really get it (mostly private sector for profit companies and fewer rather than more) understand that procurement is one of the pillars of the organization. I spent a great deal of time studying research done by CAPS Research on Fortune 400 companies and their purchasing practices. Great companies view it as a profit center (so to speak), lesser companies view it as necessary part of the process. Profit center in that an additional percentage or more can be put to the bottom line in procurement is strategic and forward thinking in its practices. I did find in the State of Arizona, a growing understanding that procurement needed to be "at the table" early and often as part of the overall management of the organization. It wasn't easy, but several pioneers starting proving procurements value to the organization. 

Gone are the days,when procurement was relegated to service function ,providing service to production dept. by meeting its requirements as indented and other departments of the organisation where procuremnt dept has very less say & user department had final say on source finalisation in most of the cases. Hence it was regarded as a back office function.In today's cpmetitive environment it has come in to eyes of most of the mangaement that procurement contributes directly to the botton line of the organisation through strategic sourcing of materials and it is regarded as profit centre by itself. Hence it is now becoming one of the important front office function. In time to come the organisations which give due importance to strategic sourcing done by competent procurement department will have cometitive advantage over their competitors. 

On the other hand Procurement is part of the Supply Chain Management as well. Companies realised that when there is no extra profit on sales, they can still get profit with purchasing & procurement tools.So spending money is also proftable ( profit center as well ) because you get your profit at the beginning by buying the same quality but economic prices ; e-procurement for instance.

Wouldn't this depend on the types of items being procured for what industry? For instance, if you are procuring toilet paper for a huge bank, I can't see the investment bankers or traders doing this. But if you are procuring sheet metal or brake systems and such for a car company, I would expect such procurement to be so critical that it would be considered front office.

BTW, I tend to dispute the concept of front or back office when it comes to procurement. Procurement supports most if not all areas of an organization. Depending on total spend, or on how critical it is to the organization, it might report to a top position like COO or CFO. Depending on the type of organization, it might be highly centralized - or decentralized.

I have seldom, though, seen it well managed in any size company I've observed, though in any firm with high enough spend, sooner or later it does get lots of attention.

I disagree with the term back-office as well. In a small firm the Procurement hat may be worn by someone who has multiple responsibilities but once there is growth it needs to change and be handled by a dedicated professional. I recently saw a job description for someone to be responsible for Facilities Management and do the MRO Procurement. To me, this could potentially be a real conflict of interest but it's an example where the Management does not know the value Procurement can bring to the table . People need policies and procedures in place which support the bottom line. If you let individual contributors do the Procurement, the firm is setting itself up in my opinion for ultimate failure.

Most procurement departments are still focused on transactional activities and forget to worry about the intelligence of process, to generate value, the sourcing cycle. Moreover, it’s necessary to measure the bottom line impacts from procurement actions. Sounds simple, but it isn’t. Because of this we haven’t reached a strategic level within organizations. Here in Brazil we’re at the same stage.