Our ongoing series that looks at the 15 annual CPO/State of Procurement reports that I have written continues today with Part Three of CPO Rising 2016: The Art and Science of Procurement, a report published in June 2016. As with many of our works, this one served as the genesis and theme for a new organization to use as a lens to examine procurement. The idea behind the theme (and subtitle) of this year’s report was not to pose the question of whether procurement is an art or a science. Rather it is to examine how the unique elements of each field can and should be applied in the pursuit of procurement mastery.
Procurement is a blend of art and science, combining business, category, and supply expertise with leading technology, data analytics, and associated value-based decision support capabilities. (To be fair, the survey did asked the question and 94% of CPOs at the time agreed that procurement is a blend of both art and science.) Procurement is a science because it deals with process and application and it studies and tests its results; quantitative analysis and precision are valuable tools of the trade. Procurement is also an art because it involves the knowledge and insight from the humanities and the social and behavioral sciences; nuance and negotiation are critical to the craft.
Here are some excerpts:
It is the ability to understand and analyze historical spend information that helps organizations identify critical issues related to pricing, compliance, risk, and supplier performance, and it is the sound knowledge of supply markets, pricing trends, and business requirements that help sourcing teams use spend visibility to build and optimize sourcing pipelines for the greatest potential value. By linking spend visibility directly to different procurement processes, enterprises can ensure that important decisions are made using the best available information. As exciting new concepts like predictive analytics begin to enter the procurement realm, the ability to mine big data with powerful reporting and analytical capabilities will only become more important. CPOs and other procurement leaders who attempt to manage their operations blindly and without spend analysis are guilty of procurement malpractice.
To achieve procurement mastery in the age of innovation, today’s CPOs must develop and balance the creative (“art”) and quantitative (“science”) capabilities of their organizations to deliver maximum value in support of enterprise goals and objectives. To do this, the CPO’s primary management task is to make the procurement staff capable of organizational performance and in doing so make sure that their strengths are operational and their weaknesses are insignificant. This can be challenging since every procurement operation is composed of people with different skills, experiences, and motivations. However, the capacity of individual staffers to make contributions is as dependent upon the management of the procurement operation as it is upon the underlying abilities of the individuals.
“We need to hire good, smart people with the right traits and values, and then we must coach and train them until complacency is recognized by all as a sin, and the pursuit of perfection – or at least excellence – becomes the standard. After we do that, then ‘processes’ will improve as a cascading and natural consequence.” – CPO, Public Sector, United States
One of the things that makes procurement such a fascinating profession is that when a procurement team is fully engaged, it touches nearly everything inside the enterprise. It also regularly interfaces with suppliers and prospective suppliers. Procurement responsibilities thus can range from the highly strategic and complex to the highly tactical and straightforward. With almost unlimited access to the enterprise, there are so many unique opportunities to create value. To capitalize on the opportunities, the team will need to draw upon a wide range of creative and technical skills and experience. Roles and projects within procurement can require broad skills while others benefit from specialization or repetition.
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