The Point by Buyers Meeting Point
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Book Review: The Procurement Value Proposition
“Although procurement has certainly evolved from its early roots, it still faces challenges in terms of executive recognition, talent management and organizational challenges. Modern enterprises are faced with a massive set of new challenges, including the forces of globalization, increased risk, complex supply chains, and the spread of government regulation on decision making, not to mention the tremendous strain of man’s presence on the earth’s natural resources.” (p. 1)
The Procurement Value Proposition (Kogan Page, December 2014) takes on some of the most pressing challenges facing procurement today and makes them seem both more comprehensible and realistically addressable. As acknowledged in the quote above, taken from the book’s introduction, procurement has evolved significantly since the early days when we got our start in the railroad industry. The problem we must own today is that the organizations we support have evolved faster and more dramatically than we have. What procurement needs is a better understanding of how to fuel our development.
Without getting mired in dry detail, Chick and Handfield work their way from the earliest days of formal procurement up to the present, considering how our collective professional identity has formed and developed. Surrounding, and in some cases influencing, that identity are forces such as the availability of targeted higher education programs and multidisciplinary expansion into supply and supply chain management. Although we are unquestionably a product of our professional past, we are also at times a ‘prisoner’ of that heritage, managing everything but owning nothing.
The focus on value, described by the authors as utility, or the “total satisfaction derived from a good or service” (p. 33), takes what has been an abstract idea for many procurement teams and turns it into an objective for which they can draft an action plan. Chick and Handfield also address the disconnect between procurement’s expected contribution to operational efficiency and the metrics used to measure our performance. The key is to define the value proposition – whether broad or narrow in scope – and then offer “high-impact procurement services that tangibly, and probably more importantly, visibly increase the value of the procurement team’s spending.” (p. 36)
Moving procurement closer to the center of the organization not only makes procurement more effective through increased alignment, it also expands the opportunity for impact. We must actively seek opportunities to engage our stakeholders, as it is their understanding and perception of procurement that ultimately defines and assesses our value.
Despite all of the focus on value, Chick and Handfield make clear that becoming more strategic does not free procurement of its responsibilities regarding savings. In their ‘Procurement Maturity Ladder’, they show the increasing level of capabilities and contributions associated with procurement maturation. As that evolution takes place, however, all lower level functions are carried forward. Although they may fulfill them through alternate approaches such as automation and outsourcing, top performers are still responsible for the tasks on the lower rungs.
Being able to grasp and maintain a perspective of the bigger picture is one of the differentiators between top performers and laggards. Leaders are not just focused on how to get to the next rung, but are constantly modifying visionary plans to get all the way to the top.
Talent is, of course, key to making all of this value creation possible. Top performing procurement teams are smaller, and have broader responsibilities and more external exposure. Development on an individual level follows a similar trajectory to the overall maturity ladder, and individuals with the greatest future potential, whether it is in procurement or not, are the most desirable. They may come from universities or other internal functions, but expecting that they intend to spend their career in procurement will likely cause them to accept positions elsewhere.
The book itself is divided into two sections: Part A which provides all of the background, context, and explanation to execute Part B, which is dedicated to facilitating ‘innovation debates’ and the implementation of the strategies explained in Part A. Combine these two elements with many visual aides and case studies, and you have a book that will help procurement organizations and individuals at any point in their evolution actively expand and demonstrate their value proposition.