Procurement has had some catching up to do.
As a function traditionally kept out of the limelight, the space is almost unrecognisable today given the scale of the transformation it has undergone.
And Dr Thorsten Makowski has had a good view of the evolution. With more than two decades of experience in procurement, he believes the function has a lot to offer the C-suite. Makowski affirms that while procurement is now an entity that is a key component of boardroom discussions, there is still a legacy perception from some sections of the workforce. “Some people still think procurement is just buying, and relate it to their individual experience of buying such as going into a supermarket and buying beans or something like that,” says Makowski. “They assume it’s simple. But as we know it’s definitely not the case and it can cause a lot of confusion. I would say for people who are starting their careers now, it’s the perfect timing to get involved because people are beginning to realise the potential of procurement.”
In 2024, procurement is a living, breathing organ and an essential component to making an organisation successful. Referred to as the ‘rockstars’ of an organisation by some within the industry, it is a clear indication that change is afoot. Makowski is well aware of this shift and explains that while great progress has been achieved, it’s not without its challenges.
“10 or 20 years ago, procurement was about making small incremental improvements, like reducing cost in projects over 2% for a specific category by a tender or a renegotiation or something like that,” he discusses. “Now, it’s like the storm just hits in your face and you just need to adapt to that. What we are seeing is some people really thrive in this environment and procurement is for people who have kind of a flexible mindset and a more general perspective on things, while people who are more introverted and analytical it is much trickier and they struggle.”
The journey
Makowski reflects on the beginning of his career and his journey to working within procurement. According to him, procurement was a slow burner and didn’t immediately interest him to begin with. However, once hooked he couldn’t leave the space and hasn’t looked back since.
“The joke that everyone in procurement falls into the space by accident is true for me as well,” reveals Makowski. “At the beginning, procurement didn’t really seem super interesting to me. But it just took me a couple of months to find there were some aspects which are really cool. I would say the most interesting one for me is that even at the beginning of your career, you are allowed to optimise the category, and then you’re responsible for millions of dollars or euros and, and where else in your career are you able to be responsible for that amount of money? It’s a cool position to be in.”
Despite the draws, Makowski is quick to reveal some challenges that come with operating within procurement. “Not everyone understands how important and valuable procurement can be for companies,” he explains. “Sometimes you have to explain to people how you can really make more of procurement and why it is becoming more important. Fortunately, to some extent, the crises that we had in the last few years have made our life in procurement easier because people were just realising how dependent they are on supply chain and procurement.”
Are we living in a VUCA world?
As a world driven by volatility, uncertainty, complexity and ambiguity (VUCA), procurement is an ever-changing space. But Makowski maintains that procurement has always had its challenges and today isn’t necessarily different to the past. “Typically, I’m quite sceptical because sometimes it’s just a fad or new trend,” he explains. “You’ve got to look at a couple of drivers for this volatility. One of the biggest that we’ve seen in the last years has been catastrophes. A flooding in Thailand or a volcano erupting in Iceland. But is this increasing? I would say no. But what we do also have are political changes, wars, conflicts, trade wars. Are we currently in the situation where this is at a peak level? I would say it has increased over the past years.”
Another key driver is technology given the ever-increasing influence it is having on how procurement lives and breathes. For Makowski, he views technology as a double-edged sword.
“On one hand you can say it gives us so much more opportunities and competitive edge. But if you look at past data, the typical outcome of an investment in technology was negative. Technology investments and mergers and acquisitions are the only two things that on average are destroying value. In today’s world, we are in a very interesting situation where the importance and the potential value gain from technology is increasing, but it’s also very difficult to implement.
“For most companies, there’s an easy strategy to deal with technology, and that’s what I would call the second mover advantage. You consider what technologies might work for you, you look at your peers and when you realise that they tried it and failed, you are lucky because you’re not involved. When you realise they tried it and are successful with it, you try to copy it as fast as possible. For most companies, that’s a great strategy.”
Empowering the talent of tomorrow
Procurement lacks talent. In truth, many other industries probably do too. But procurement’s skills shortage is a well-known priority to many in the industry. A professor at SKEMA Business School in France since March 2021 and having served as a lecturer for much of the past two decades, Makowski is passionate about encouraging the next generation of talent into procurement’s workforce.
“The talent shortage isn’t new, we’ve always had one,” he explains. “When we talk about operational and strategic procurement, I would say operational procurement for most companies hasn’t ever really been a problem from a talent perspective. But strategic procurement typically always has. One of the problems is that a lot of business schools haven’t got the coolest perception. It doesn’t have the sexiest sounding careers like investment banking or consulting. But it’s changing. Secondly, the world of procurement is surprisingly complex. It’s not just about buying. A CPO needs to understand how to deal with suppliers, people and entities from different cultures.”
Makowski reflects on his own day job and recognises the role he can play in getting procurement more visible in business schools. “One of the really shocking things is that a lot of business schools don’t even offer a degree in procurement,” he explains. “It’s only something like five or 10% of good business goods in the world do offer it. That creates a situation where it’s very hard for a young person who wants to learn more details about what a career in procurement would look like. It’s hard to find a university that has a high-quality programme for you. So that’s another real challenge in that area.”
With an eye on the future, Makowski admits the future is unpredictable. But he offers his opinion on the direction of travel the space over the next few years. “I think it’s very difficult to know for certain but sustainability, VUCA world and technology will still be three major trends in procurement,” he discusses. “We’re lucky that these topics will not change and disappear. The interest in volatility, technology and sustainability will increase. But who wins? Which area will have the most focus on it? That’s uncertain. The typical CPO we have today is a male in his mid-40s – this will change. We will see younger CPOs and more females in these positions which is great for the profession. You need to have a strong personality to react quickly, especially to these three focus topics.”
