Insight into Purchasing: Purchasing – The Future of Purchasing?
Do we have a future in Purchasing? And if so, which direction is it heading?
To gain insight, we check where it began and whether we can still move forward with the same drivers. Unconsciously, I think of a recent question from a client who, after a new step in his career, became the N+1 of the CPO. With no (professional) Purchasing knowledge, he is intrigued by our jargon – something reinforced by one of his Purchasing Managers, who argues that “Purchasing” and “Procurement” cannot be used interchangeably. The fact that a semantic discussion – Purchasing vs. Procurement, and what about Sourcing? – can still be a topic to raise with a board member is not a good omen for what kind of future we (can) have! Sic!
Back to basics. In the beginning, there was no “Purchasing profession,” but within production, “people” – whether it was Finance or Operations who had the vision, let’s leave that aside – saw a drive toward greater efficiency and the need to handle “direct purchases” in a more structured way. Economies of scale, supply certainty, optimisation in logistics and communication were undeniably the seeds of Purchasing. Finance certainly also pushed “cost reduction,” although every Purchasing professional will argue that “savings” are a consequence and never a goal in themselves. And no, we don’t escape the business logic that we must always generate more than we cost. But if Purchasing is primarily seen as cost-cutting, we overlook what we could mean for our company – a contribution far more interesting than the well-known “squeeze the lemon” technique or the administrative placing of orders.
Nevertheless, we see that virtually every Purchasing department is plagued by a “savings” KPI. In the CFO-style approach to Purchasing (see above), this becomes the “justification of Purchasing.” But it can also – as so often with KPIs – be the result of not measuring what truly matters, but rather what is (easily?) measurable. And so we sometimes contribute, through our own justification, to a stigma whereby neither our internal client nor the supply market applies the transparency that would fully (or could fully) leverage the added value of Purchasing.
This brings us to an additional question from the same board member: demystifying the “Strategic Partner.” The fig leaf behind which he sees all staff functions hiding – whether HR, Finance, or Purchasing. If we build further on the “not-primarily-cost-saving” role of Purchasing, we arrive fairly quickly at a solution to that mystery. Purchasing only fulfils its role as a strategic partner when we are involved early – sitting at the table during budget rounds, not wearing the hat of cost-cutter, but as an active contributor to realising the company’s profitability and mission. Working not harder, but smarter – or should we say “purchasing smarter.” After all, it is during the design phase (defining specifications) of strategy that fundamental choices are made, which carry greater or lesser cost implications.
Our “being strategic” consists of challenging the path – or, as one of our consultants puts it, applying the CSC method (common sense check). In other words: the mere act of questioning by Purchasing – without any deep specialist knowledge – through asking probing questions, aims to encourage the true expert (our Internal Client) to articulate their search for a solution as simply as possible. This not only allows “must-haves” and “nice-to-haves” to be separated, but also ensures the market can be approached broadly. Within – what’s in a name – Category Management, Purchasing can even inject knowledge from the supply market to jointly develop, together with the Internal Client (and even the Supply Market), the most (cost-)efficient path. Purchasing doesn’t stop at this think-tank activity, but also takes on a prominent role in effective implementation and follow-up, as per Van Weele’s “Servant Leadership.”
The future of Purchasing will therefore only grow in importance, particularly within a macroeconomic climate of refocusing on core activities and mobilising the supplier market as extended department(s) of our company – as seen in outsourcing initiatives.
This vision of the future is of course conditional. Purchasing will need to have, earn, or be given the trust of both the Internal Client and the supply world. Purchasing embodies entrepreneurship and excels in maturity – somewhat like the number 10 in football, or letting the defenders join the attack to allow the strikers to score. Purchasing can only shine further if we dare to take responsibility for challenging the business — from process knowledge within Purchasing, and even without necessarily having deep specialist knowledge of the purchase itself. Combined with rolling up your sleeves like a seasoned Project Manager during implementation and aftercare, a healthy risk management reflex, and bridging communication across areas of expertise – this ensures a long and happy co-creative life for Purchasing. A semantics-based dialogue about Purchasing, Procurement, Sourcing, or Category Management then immediately becomes a non-event.