I just spoke to a senior executive of an existing client who I’ve Zoomed (yup – it’s a verb too) with many a time but finally met in person a couple of weeks ago. It does make Zooming better if you’ve at least met the person once 😊. We got into a general discussion about the future of Procurement/Supply Chain and how some companies were starting to outsource segments of their function. And having done that for a few clients, I shared some of our thoughts during the call and thought of a few lessons learned after I hung up.
And here’s the biggest one – the KOD if you will!!! You must make sure that your and your organizations’ relationship with your internal stakeholders is ABSOLUTLEY ROCK SOLID. You will have turned over parts or all of your value creation to an outside party. Therefore, ensuring that there is a significant level of mutual trust, collaboration and mutual respect becomes critical. And these are not just bromides that I’m trying to provide because a lack of phenomenal stakeholder alignment AND agreement on their Strategic Value Drivers will be a KOD and you should have an exit strategy in place because the initiative has greater chances of failure than not.
The nature of Supplier Relationship Management Optimization also fundamentally changes because you are now managing outcomes and not your own internal processes and that (as your mother might have told you 😊) is a totally different ballgame requiring totally different skills sets. And most procurement organizations do NOT possess these competencies today – they may think they do. Managing outcomes and those relationships requires strategic thinking and a set of change management competencies that few procurement professionals possess today. And sadly, their leadership is doing little to ensure that they do ☹.
The other caution that must be taken into account is how to “outsource” parts of your function that you have deemed non-critical to delivering your Stakeholder’s Value Drivers. Think of that as a black box that magically does that which you do not want to do. You could outsource your AP function to India. (and add more functions to that list). You could engage with a GPO (and as discussed in this blog before, they are much more sophisticated and effective now). They could not only take over pieces of your function but can also provide ongoing Category Management AND significant leverage which you could never replicate. Another option which should make everyone pause is AI. We are clearly at an inflection point in IT and our function. These inflection points happen infrequently but when they do, they do tend to shake things up permanently. I was there when Bobby Lent (founder of Ariba) and I would get into very engaging debates at Barry Weigler’s (SIG) semi-annual procurement “parties” because we all thought that was an inflection point (sadly, it wasn’t). BUT, AI is an inflection point and as we discussed recently in this blog, AI job degradation is real and immediate. What that means is that portions of your organizations work efforts may soon be taken over by the black box of AI and you may not have a choice in the matter. Inflection points like this must dictate your future strategy?
What all this also means for the future of Procurement is that ALL of your people better be armed and prepared with the Strategic Competencies they will require to survive and succeed. To be successful under any of the scenarios above means that there are many things that the Black Box can do but there are also certain things that the Black Box will never do and that requires all of your people to be Change Agents and Consultants. N’est ce pas?
