The primary role of the procurement professional is to help an organisation meet its collective goals and objectives. The collective goals of a business or organisation might include a wide range of objectives such as, profitability, standing in the marketplace, market share, competitive position in terms of the quality and value of its products, social responsibility and cost reduction. This is where earns his/her money.
However, the new age of digital communications and fast changing global trading is fundamentally altering the way business is done. Knowledge, capability and understanding of global business risk complexities have a broader impact on an organisation’s progress than ever before. Buyers need to have an overall understanding about how to gather requirements, evaluate supplier capabilities, develop relationships and manage risk.
A Strategic Function
This makes procurement a critically important strategic function. The ability to purchase certain goods, materials or services effectively can often determine if the organisation’s operations will continue in the medium to longer term.
With this in mind it stands to reason that the aim of the buyer or procurement manager should be to tailor actions to opportunities; to place emphasis on the strategic elements of procurement, and present innovative ideas to the CEO and at board level.
Planning & Management
If we look more closely at supply chain management; this includes the planning and management of all activities involved in sourcing, purchasing and all logistics management activities. It also includes coordination and collaboration with network partners. Network partners can be suppliers, intermediaries, third-party service providers, and customers.
An Integrating Function
In essence, supply chain management is an integrating function with primary responsibility for linking major business functions and business processes within and across organisations into a cohesive and high-performing business model. It includes all of the logistics management activities, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, finance and information technology.
Lack of Understanding
Yet in my opinion some people do not fully understand the full meaning of Procurement and Supply Chain Management, not least the heads of procurement and members of Boards who have responsibility for Procurement. More often than not the emphasis is to save money, which although important in many companies this is not the primary objective.
All this implies that the people involved in procurement need more than common or garden knowledge and skills if they are ever to improve overall business performance and participate fully in the top level discussions that effect not only procurement but the overall policy and strategy of the business.
Role of the Buyer
The character of a buyer has changed significantly in recent years. Today the buyer should be more a business manager; a person requiring openness of mind and with the ability to establish relationships that work to mutual benefit.
The misapprehension held by many people is that a buyer’s role is an administrative and clerical role is simply not true. Optimizing supply chains and mitigating risk requires discipline, information, analytics, decision modelling and the use of technology skills.
The fact that competition in global markets is ferocious means buyers must manage supply chains efficiently and profitably using all the tools and techniques at their disposal to maximize opportunities and avoid risks. This is why each person engaged in the process needs to have a good understanding of the business they work for.
Understanding the Business
Business knowledge would include for example an understanding of;
- The organisation’s mission, strategy, objectives and products;
- The organisation’s position in the marketplace;
- Political awareness of the markets within which the business operates;
- The organisation’s policies, relative procedures, ethical standards;
- Internal and external stakeholders;
- Legal and financial awareness;
- Understanding of the economy (local and international)
It is often necessary for the buyer to collaborate with technical, operational, legal and commercial colleagues to ensure specifications, tendering processes and contract terms have been optimized. Therefore good interpersonal skills are a pre-requisite if the buyer is to work effectively with different stakeholders and the organisation’s suppliers, all of whom have a legitimate interest in the way the procurement process is carried out.
A Changing world
No procurement director, manager or buyer can stand still and survive if they ignore the fact that the world around them is changing. I would encourage them to pick up the gauntlet and develop their business management skills now, before it’s too late.
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Allan Robertson – Director at The AICP