Member Article

Undervalued procurement functions could be exposing businesses to huge risk

The human element, rather than technology, is still the critical factor in the procurement process, according to 1st Executive.

The specialist procurement and supply chain consultancy argues that that the human factor is increasingly overlooked in the procurement process in favour of automation. 1st Executive has urged firms to review their existing e-systems to ensure that they are maximising the potential of their suppliers’ specialist knowledge. Failing to do so, the firm warns, could mean procurement misses out on opportunities to add value.

James Tucker, co-managing director of 1st Executive, comments.

“The vast majority of procurement professionals don’t just want to be seen as hard-edged negotiators who want to strike the best deal on price alone, they want be recognised as relationship driven and keen to create more visibility within the business and develop inter-dependent relationships with their supply base. However, it’s become obvious to us that the systems and tools that many firms have in place are actually working against them. Many e-procurement systems for hiring, for example, don’t take into account that some firms are sector specialists and therefore have a deep understanding of the procurement market, much greater than that of a ‘generalist’ recruiter. It’s concerning that firms are relying on these systems that clearly don’t calculate the full value that suppliers can provide.”

“In the modern tech-led world, procurement can often hide behind a process or piece of technology and forget that business is essentially about relationships with people. And if procurement wants to be recognised as a strategic function by stakeholders then it also needs to look at the value it adds and communicate that effectively. We do come across many procurement functions which are doing things the right way and winning the hearts and minds of key stakeholders as well as recognising the value that their supply base can offer, but it’s by no means endemic. To sidestep this issue, functions should solely focus on 100% value creation. And if we want to get to that stage then we need to understand how procurement truly creates value for the business. Once that proposition is clear, it’s then about focusing purely on activities that support value creation and removing those that don’t through automation. However, let’s not fall into the trap that many functions have done and forget the importance of the human element, after all, there is only so much that can be automated. Ultimately, if you don’t get the right talent in then the vision of 100% value creation is unlikely to ever become a reality.”

This was posted in Bdaily's Members' News section by James Tucker .