WHY A BLACK BOX APPROACH TO PROCUREMENT ISN’T WORKING

In scientific terms, a black box is a device, or a system, with inputs and outputs, but where its internal workings are concealed.

It shouldn’t be, but for some businesses, the procurement process is like a black box: they know they need to select suppliers, so they feed their requirements into the system, and they wait for the results.

In these situations, the need for rigour has created dogma.  Decisions have become ruled by the columns and rows in the spreadsheet.  Suppliers and the details of products and services are fed in, compared on price and process and spat out of the other end.

Typically, this process emphasises supplier selection over supplier relationship management and is divorced from the main operations of the business it serves.

CIPS reports research findings from e-procurement specialists Wax Digital that 8 out of 10 respondents do not think they are currently driving an innovation culture within their supply chains.

Changing Perceptions

Procurement does encompass compliance and processes, but these should work to allow a business greater freedom, not less.

What it requires is a change in perception about what a procurement function is for, and what it will achieve.

A procurement function should be collaborative. It should be there to serve the overarching strategy of a business or organisation. In other words, there cannot afford to be a them and us approach to procurement.

Enlightened procurement is the key to this collaborative approach, where the processes involved always reflect the wider goals of the organisation which the function serves.

In practice, this means placing as much emphasis on supplier management as on supplier selection.

Do You Understand What You’re Buying?

Compliance exists for a very good reason: to reduce risk.  Successful businesses strike the best balance between risk and opportunity.

Your suppliers provide the goods and services that you need to run and grow your business.   Of course they should support your drive to innovation and growth.    Yes, there are risks that they can create for your business – but there are also opportunities.

You are buying your suppliers’ impact on your business.

The best suppliers know their customers and their market well.   They see how clients use their products and services.  They innovate to meet their clients’ changing needs.  They sometimes have answers to problems that clients haven’t yet considered.

Failing to collaborate effectively – or creating restrictive frameworks – rules out this opportunity.  Treating every item or service as a commodity fails to recognise the expertise that the right suppliers will bring to your business.

The procurement process needs to be rooted in a deep understanding of the business, it’s strategy and the impact that suppliers can have on performance.

Put another way, procurement processes and compliance are there to safeguard your business but also to help drive it forward.

Your procurement function should be a trusted advisor and collaborator within your business or organisation.

Enlightened procurement is about building a supplier base that is both transparent and adds value.  It is an enabling process, not a formulaic decision engine.

Ditch the black box.