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Book Review: Strategic Procurement
“To succeed in business is more complex than it used to be - it is no longer economically desirable to control all the components of your customer value proposition.” (p. 6)
Strategic Procurement by Caroline Booth (Kogan Page, November 2014) is a second edition, updated from its original release in 2010. Before I even get into the book’s content, I think it is worth reflecting upon the pace at which the procurement profession is changing. In the four years since Booth first released this book, there have indeed been significant changes in economies and business dynamics, requiring equally significant adjustments in procurement. In the preface, Booth calls out her increased focus on risk and the improved position of procurement, as well as enough changes in M&A involvement to add a whole chapter on it.
This book provides a rich and diverse set of new perspectives on procurement and its interactions with the enterprise. Some of them, as I will detail, have an ‘earworm’ quality to them and are bound to be played and replayed in the minds of readers until the timing is right to make use of them.
The book is organized into short, focused chapters that are prefect for busy practitioners or executives with short attention spans. Even the most difficult of procurement’s internal challenges are addressed in such a way that if a non-procurement person were asked to read them, a fight would not break out (not from Booth’s words at least). The reality is that procurement is no longer contained to procurement, a point the author makes clear when she discusses procurement’s role in procurement. The function’s role has shifted as a result of other business decisions, and a deliberate reset is in order. Any changes that are made should not only acknowledge the new requirements of procurement, but should improve alignment with the overall corporate culture.
My ‘earworms’ from the book are as follows:
‘Needs’ must go beyond requirements.
In other words, don’t try to ask for exactly what you think you need. Instead, focus on the desired outcome. An example from the book is to ask for temperature regulation rather than an air conditioner. This will be particularly helpful in the case of outsourcing agreements, but will make sure that suppliers’ full knowledge and capabilities are put to use in every category.
A new definition for value.
I like to get new perspectives on this oft discussed, rarely clarified topic. Booth does a particularly good job, defining value as the relationship between a pool (or category) of spend and the organization. It isn’t about relative spend or number of suppliers so much as it is how important or promising they are.
Break down the supply chain – but not too much.
Procurement routinely (and logically) breaks down large categories or chains of spend to make them more manageable. In doing so, however, we must take care not to lose the cohesive magic of the whole. Even seemingly peripheral goods and services can have a significant disruptive impact on a primary supply chain if they are changed without understanding their ties to the bigger picture.
Shrink the pie.
This is by far the best idea from the book. An ever increasing number of procurement professionals are moving their focus from price to cost, and taking a total cost of ownership (TCO) approach to spend. In this era of value based negotiation, we are learning to ‘grow the pie’ rather than play a zero sum game. This flipping of that concept is a great way to think about TCO and to explain it to stakeholders.
I could go on, but I think the concepts in this book are best related to on an almost personal basis. The lessons Booth has learned during her tenure at organizations such as Shell, Ernst & Young, Lloyds Banking Group, and TD Bank Group, are well worth reading first person.