Back to the Future – Strategic Sourcing is Dead – or It Should Be…

We wrote a series of blogs: Strategic Sourcing is Dead!!! in 2010 on this topic and we caused a huge stir in our professional community.  Our basic hypothesis was that the sourcing process was actually destroying, yes destroying value for their organizations.  I won’t bore you with the various names and terms that were thrown our way but will say that the “attacks” were vicious.  Of course, there were a lot of supporters as well.  While it stirred a lot of debate and some progress was clearly made (at least there are many new labels to define the sourcing process) the IACCM conference reminded me that we still have a long way to go.

There was a very interesting exchange between a senior executive from the sell side (Hello Jonathan) and a very senior executive from the buy side that illustrated the long distance we still have to go.  The buy side executive was discussing how they are moving much more towards focusing on relationships and not contracts and how they wanted to manage their partners in their supply base.  The sell side executive (Jonathon) challenged him in a very professional way because the buy side executive is his current customer and Jonathan indicated that reality was far from aspiration – and the buy side executive had to totally agree.

I actually ended up having a discussion with Jonathan at the conference and a subsequent call and we ended up having quite an animated conversation.  He told me that he had  a number of discussions with procurement people at the conference where he was told that their role was to protect the very naïve executives who had to make supplier decisions from the suppliers because they may somehow cajole and convince the decision makers to make all the wrong decisions.  The result is that the various sellers (solution providers) have to depend on procurement’s translation of the needs and decision factors of the decision makers or “actual consumers”.  I would have expected that procurement’s role was to identify the absolute best solution provider possible and then work like crazy to establish a long term relationship with them?  This notion of blocking the solution provider from access to information, decision makers, actual needs etc. seems totally counter intuitive and counterproductive?? Having been on both sides of the equation (buy and sell), I will sheepishly admit that I also acted like that while on the buy side – initially.  No wonder sellers many times look at procurement organizations as nothing but an impediment and  communicate that to procurement’s stakeholders.  Stakeholders also start looking at Procurement as nothing but gatekeepers and paper pushers who have some dogmatic process that requires a number of boxes to be checked.

Procurement should therefore not be surprised if it continues to be looked at as a tactical function not capable of acting strategically and therefore relegated to the “back office” and being kicked around in every organizational reshuffle.  We have to re-think the basic premise of Procurement.   And by the way, a number of the technology solutions meant to make procurement more efficient get in the way of being more effective and something that these solution providers should start addressing to get a significant competitive advantage.  We actually end up not responding to a number of RFPs if they are being run on these types of platforms because we know that the dogmatic nature will preclude us from putting our best foot forward.  Hypothetically if we were the best solution (and we like to think we are sometimes 🙂 ), the procurement process precluded the best solution from being presented to the decision makers and thus defeating the entire purpose for Procurements existence?

We will be trying to convene a small group of forward thinkers from both the buy and sell side to start having some discussions about how solution providers can partner with procurement to ensure that the Desired outcome for procurement are being met AND the best solutions are being put in front of decision makers.  I remain convinced that while I am very enthused about the progress already made we still have a way to go and creative thinkers from both sides can easily fix a number of these issues.