What does strategic procurement actually mean and how is it changing thanks to the COVID-19 pandemic?

So, who is Jeremy Bowley? 

I’ve been in procurement for 20 years, scarily. I started out like most people did in buying within a graduate scheme role in a water company. I’ll leap forward to today, now I run a boutique procurement consultancy [Insider Pro]  and we specialize in what we call enterprise value creation.

What’s your view on how procurement is becoming a different beast for businesses?

We definitely have an image problem. It is distinctly uncool. If you go to a graduate fair at university, people will gravitate towards sales, marketing, HR and to a degree accountancy, which in itself is not the most exciting thing. If I say to people do you want to add up for a living and do spreadsheets? I think they’d probably say no. But what those professions offer is the ability to influence and to have impact and I think what we’re starting to see, and it’s been a long journey of 20/30 years probably, is procurement is starting to get its mind around how it delivers impact. But there are still though those of us, even in the profession, who would describe it as going shopping for a living. I think one of the reasons that we really struggle as a profession is we’ve not got very good at describing the impact that we can have to other people, then that feeds through to our ability to attract talent, our ability to influence the organization and our ability to make a big difference at a strategic level.

As a procurement professional, if you were to speak to me and I was a graduate asking why I should care about procurement more than any other business area,  what would be your quickfire way of, at least introducing to me, the true value and the importance and even the significance and enjoyment of procurement?

For me, procurement is all about coordinating collaboration between organizations and that’s way more challenging and exciting than just doing it within a business. So if you go into a business and go into a normal functional role, generally speaking, most of your effort is going to be around how do I coordinate the efforts of the people within my business? What procurement allows you to do, this is the exciting bit,  it allows you to go and say, “Okay, I want to try and help a much broader group of people collaborate and drive value.” In a junior role in procurement, you’re going to get to speak to and interface with managing directors, sales directors, operations, directors, COOs, all those sorts of people, of your supply chain. And then your job is to coordinate those, to deliver value for your company.

To use Steve Jobsism, make a dent in the universe. I can’t think of another function that offers that at such an early level. Of course the rub being we don’t really talk about it like that, and we don’t really tell anybody about that so we underplay our ability to have an enormous impact. That’s probably why we’ve got a bit of an image problem. I don’t think we back ourselves enough. I do, I struggle to find another function which has that enormous impact, particularly at a sort of entry level.

What do you think is key to changing that conversation?

It’s about being able to demonstrate the impact that we have and being honest with the business about it. There’s an authenticity that sits behind this. I think it comes back to what is our role and therefore, how do we articulate it? Our role is to look into the organization and say what the organization needs and  help resolve some of the conflicts, because different people in the business will want different stuff, depending on which function they’re within. It’s then about looking outward into the world and saying, “Okay, how do we best satisfy that need?”

If we start to talk about it in those terms, it becomes a strategic conversation. What that means though, is that we need to take ourselves away from the stuff that’s safe and comfortable. I hear people talk about strategic procurement and it is the least strategic thing you’ve ever heard. What we’re looking for is opportunities for us to make a real difference to the business model. So for example, if you were to say, “Through my supply chain strategy, I’m able to build such strong relationships with my suppliers, but that represents a massive barrier to our competitors, getting their hands around that supply chain or replicating that supply chain and therefore that delivers X or Y in our business proposition,” That’s strategic. We’ve got to spend the time talking about that, because until we do, we are going to be a back office function and probably rightly so.

How much of it has to be that meeting in the middle, if that makes sense?

You’ve got to have people who are open to the conversation. So you’ve definitely got to be in a business that’s functional, that’s working. If you’re in a completely dysfunctional business where there’s just no conversation, of course it’s going to be pretty much impossible. But what I’d say is that’s not most organizations. Most organizations are by virtue of the fact that they’re trading and being profitable and throwing off cash, then they’re going to work. They’re going to have their problems, but they’re going to be open to anything that delivers real value.

So if you can demonstrate that through how you orchestrate supply chain, you can grow sales, you can improve consistency, you can reduce risk, you can increase cash flow, you can improve profitability, you can take away some of the barriers that stop the organization growing. Then it is not a difficult conversation to get people to come across the bridge towards you, because ultimately the C-suite is motivated by, and certainly in our world, but I think this is true of all organizations, by the value that it can create. So by definition, you become part of the solution. And if you turn up to any CFO CEO and say, “Hey, look, I think I can make the organization’s share price go up by 10%.” And if you can do that credibly, you will get traction. There’s absolutely no question about it. The trick is of course, to do that credibly and have something that really does make a difference.

What does it mean for, not just the procurement guy, but obviously the wider business, to have a seat at the table?

“Procurement deserves a seat at the table is something I hear a lot. My response to that is always pretty much the same. And I say, “Well, does it deserve it?” So if procurement is adding strategic value, it deserves that seat at the table. If procurement isn’t doing that and it’s just doing tactical work, delivering slightly better prices or managing day-to-day supplier relationships, but not really elevating them and creating extra value for the customer or creating barriers to entry for the competition or locking in value at an enterprise level, it doesn’t deserve a seat to the table. I’m sad to say that that’s probably true in 8 out of 10 companies where procurement isn’t something that they potentially need to be good at, or can be good at, because of the nature of the way that they manage themselves.

It frustrates me intensely because it just sounds like we’re moaning. It’s almost as if to say, “Oh, I deserve a seat at the table.” Well, go and earn it. Because if I’m looking around that board table as a CEO, I’m looking at each of those people, each of those posts, each of those functional roles, and I’m saying sales, how does that add strategic value? Finance, how does that add strategic value? Marketing, how does that add strategic value? And if I can’t respond to that with a clear demonstration of adding proper strategic value, then I don’t deserve that seat at the table. And let’s be clear, sending out a tender or following a seven step sourcing process, that’s not strategic. It’s not moving the organization fundamentally forward. It might be doing a good job, which is very valuable and needs to be done, but it’s not strategic. And unless you are genuinely adding value to the enterprise at a fundamental level, then we definitely do not deserve that seat. We need to work hard for that.

As the conversations have moved forward and now procurement has been given a chance to show off and say, “Look what more we can do than just save money,” at the end of the day, you still have to save money. So how is that balancing act unfolding and how difficult is it?

The sort of classic adding savings and basic EBITDA through things costing less, that’s the day job. That’s not strategic. What we’re well-placed now to uplift other parts of the organization because what’s quite exciting is, as the world changes and there are more small organizations and innovation, we’ve got more of an opportunity to bring those things into play. So you’ve got to do both.

I always think the challenge with procurement is to, yes, deliver the basics, but then to start thinking in system terms. It’s shifting our thinking away from tactical and almost a tick box exercise of, “We’ve done a tender and they’ve passed all of our tests and I’ve read their accounts, I’ve done all the basic stuff.” We need to shift into systems thinking now, and how do we manage the ecosystem of potential that is out there, which is huge and changing? That is an exciting piece that we’ve got to get our minds around.

It depends on your organization’s appetite and the need to be good at procurement. Not all organizations need to be good at procurement. It depends on your appetite to go and do more. The best news is that there is more opportunity out there now than there has ever been.

What has the general impact been of COVID on that procurement conversation?

In lots of ways, I like to think about COVID as being an accelerant. So COVID really has probably accelerated or amplified all the things that were probably going to happen anyway. The suppliers in which we took too much risk as a profession and we let stocks run too thin, got caught out by COVID, by the logistical challenges, by factories shutting down, by borders closing.Those things would have probably happened anyway, they just wouldn’t have happened all at the same time and it would have been slightly less stressful, I guess. But those weaknesses would have played out in the supply chain over time anyway. And all COVID did was just make that happen quickly and all at once. COVIDt, and it’s a blunt instrument, will shake out the companies that weren’t going to make it.

All of a sudden we’ve realized that some of the suppliers, who we thought were in good shape, were not in good shape and actually our risks were much bigger than we thought they were, so there’s a big re-evaluation. And in the sort of rebuild, I guess, we’ve now got a real chance to shape things, which is actually really exciting. 

Looking at Insider Pro then, why do we need a business like Insider Pro in procurement?

We help businesses build their enterprise value. We help organizations look internally and say, “What do we actually need in order to grow?” and we help them look back out to the supply chain and say, “Okay, what’s the best way of doing that?” We sort of sit in a space between procurement and operations in many respects. A lot of the work we do is really helping the larger group of stakeholders, both internally and externally collaborate for more value.

That’s the bit that’s super exciting because we have in excess of 50,000 people in our suppliers and supply chain. Imagine leveraging 50,000 people’s brain power. That’s what’s exciting. That’s what we do and what’s quite exciting is, you are sitting on a huge amount of opportunity if your eyes are open to it.

When we talk about bringing outside people in or outside consultants in, there’s often teething problems and even reluctance to engage a third party . How do you mitigate this and work collaboratively? 

There is no one way to do things, there’s more than one way to get there and you’ve got to find the way that’s right for the organization. You hear an awful lot about best practice and I’ve even written about best practice myself and I sort of hate that. In our minds, there’s absolutely no best practice whatsoever. What there is, is some things that work and some really good ideas and what you’ve got to find is the organization’s next practice. We understand how we better service the things that that organization needs next, rather than some mythical idea of what’s best.

In light of  COVID, a lot of people are looking inwards and examining where they may be thinking that while  things have been going well, things could still be better. What would be the one permanent change you could make if you were given the power to do so?

Back in the 1970s, there was  an economist called Goodhart, who gave rise to something called Goodhart’s Law. It basically says that as soon as you measure a target, it ceases to be a good measure, because essentially people start to game the system. So the one thing I’d like to see the end of is things like savings targets or improvement targets or KPI improvement. It just drives me to distraction because all it does is force us to change the definitions of what success looks like. The setting of arbitrary targets, which our industry is absolutely awash with is well-intentioned, but entirely counterproductive the vast majority of the time.

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