4C Associates’ Milan Panchmatia explores the complex and evolving relationship between procurement and innovation.
The word ‘innovation’ is overused. It has become one of the cornerstones of corporate jargon and in doing so has lost much of its meaning. To innovate means to do something new. That does not necessarily refer to a completely new product, but also to finding a more efficient solution to an existing challenge.
Procurement is a function which has to constantly alter its approach and outlook. During the financial crisis procurement was able to take on a more strategic positon, propelled by the need of many organisations to optimise spend.
The function has also had to face the challenge of implementing processes whilst maintaining flexibility. A lack of agility on the market has resulted in many well-established organisations struggling against smaller, more nimble start-ups.
It is no surprise that this complex balancing act has pushed the function to embrace innovation.
The right talent
Procurement is well aware of the responsibility placed on it and this has been reflected in hiring practices. Analytical thinking is now one of the primary skills required from potential hires. At 4C Associates we focus on sourcing candidates able to analyse data and apply it to solving complex challenges.
That’s not to say more traditional skills such as negotiation have gone out the window, however, there is much more emphasis on strategic thinking. Procurement is no longer just about the numbers and the function needs to be proactive and able to identify businesses opportunities and drive growth.
An expanding remit
The opportunities for procurement professionals to expand and refine their skillset are not lacking. For example, the rise in consumer businesses outsourcing key facets of their operational activities, paves the way for better Supplier Relationship Management initiatives.
In this context, the role of procurement auditing, vetting and sourcing suppliers will be more important than ever before. The function will find itself at the forefront of business growth and taking on responsibility for the potential success or failure of organisations.
For international companies, an increased focus on providing specialised products for various markets will further reinforce the need to outsource. This is especially relevant given the rise of Brazil, Russia, India and particularly China, as the globe’s biggest economies. In these regions, working with the right local talent is vital.
These twin trends mean procurement will need to adopt a more holistic approach to sourcing and consider more than cost factors when appointing suppliers. Reputational risk and sustainability are just two of the many potential issues to take into account.
A bright future
Whereas in the past, procurement functions were expected to focus purely on cost saving measures, that is clearly no longer the case. Supporting other departments with key market insights, optimising supply chains and working closely with suppliers, are just some of the ways for modern procurement functions to deliver value.
Once the foundations of an effective cost management system have been set, the function is free to innovate and deliver to its potential. Modern procurement departments are able to guide the businesses strategy whilst impacting the bottom line. Innovative thinking and an appetite for challenge are part of the new procurement mind-set.