Strategic Sourcing and Procurement is Still Something New for Many!

Procurement adoptersAs Strategic Sourcing and Procurement, as a function, is about twenty years or so old, still is very new to many. In concept procurement has being the dual partner of commercial transactions. Since the beginning of trading three thousand years ago until today, Buying has being the sole partner of trading/selling. When the ancient civilizations carried on their trading transactions there where buying agents and supply agents taking care of the function and logistics of the supply chain. It is until a few decades ago that the functions is being regarded as being a source of strategic advantage in the ever growing race for global dominance in a specific market.
Competition has grown so fierce that companies are looking everywhere, and I mean in every little corner of their operations, in order to find an advantage in a race to win the business before your competition does. From innovation to human resources to sustainability to the environment, nowadays everywhere you look there are initiatives to take care of all aspects of business. Before this internal movement all the focus was on selling and selling and getting volume and growth. But many companies instead of growing big they just got fat. Nobody was looking at expense just sales.
Strategic Sourcing and Procurement became more relevant on this new approach at the whole enterprise. For many that embraced the benefits of creating strategy around buying got a really nice return on the investment. Not only the bottom line benefits where double digit, the bottom line improved and they got that advantage on their competition that put them ahead of the game by far.
Still now we have some twenty years of historic data from early adopters there is a large population of companies that are still buying without strategy. Many enterprises that do not believe in investing on the sourcing side to improve the function. Companies that do not want to embrace e-sourcing and don´t get basic concepts like total cost of ownership and supplier relationship management. Hard to believe but after twenty years the function still is an early development stage on its strategic side.
One day I did a workshop in Malaysia called “best practice in sourcing and procurement” set to explain to a group of procurement professionals the latest best practice of our profession. The group was made up from delegates from all over Asia, mainly oil and gas and the banking sector. To my amazement they did mostly buying operations. Transactional oriented and policy dependent. Did the same workshop in Panama with delegates from the Americas and again the same. This made me think about how new really is the strategic sourcing and procurement.
I had the chance to talk to a procurement consultant and expert on e-sourcing, specifically on reverse auctions in the public sector in India. To my amazement what they had set up was a reverse auction mass production machine. They will do thousands of reverse auctions daily to source for an array of things! No strategy there just “do and repeat”.
We have come a long way on developing the function. We need to work more on the adoption so it can be wide spread. The best sourcing and procurement still in the hands of the few.

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