Whats in a name?
It sometimes seems so from the number of times the procurement press raise the debate about what to call ourselves. Procurement Leaders magazine (and the others) have repeatedly used the topic on their blog. In this article and this article, and this article, etc. It seems like a regular topic to fill editorial space, when in fact the purchasing press are as guilty as anybody in using multiple terminology.
Needless to say, I am among those who think we have better things to focus on – like adding value. Value is the key, and each company’s value chain is different. Arguing about Purchasing vs Procurement does not really add value. What about other names in common use like, Supply Management or Supply Chain Management and others? Procurement could rightly be argued to be a part of the supply chain. Does this make procurement subservient to supply chain as a function? I don’t think so. It depends upon the focus of the firm.
A firm level debate?The discussion needs to take place at the firm level and so the debate to standardize terminology across all firms could go on forever – and quite frankly, alienate the profession with stakeholders. What is important for practitioners, is to understand their role in their firms value chain and to make sure they contribute to it. To obsess about the name this is done under, is not the best way to enhance the status of the profession.
Linked to this argument is, to whom procurement reports? Again we see significant variation among firms. Should we report to the CEO, CFO, COO, CIO, or HR? I have seen them all – and this too, reflects the focus of the firm and the potential for our profession to add value – and the maturity of the profession in the firm.
Value ChainsA further argument in this debate links the issue of our ‘name’ and ‘role’ together. If we think in terms of value chains where we ‘buy, add value, and sell’, then we could argue for a ‘commercial function’, with Procurement – Sales & Marketing, creating an integrated supply chain reporting to the same CXO. A Chief Commercial Officer for example. I have seen this also, and it worked very well. So this raises the possibility of the Commercial function.
ConclusionIn the end, it must be a good strategic fit with the firms value chain and reflect the ability of our profession to add value. This in turn is linked to the level of maturity, % of spend with external suppliers, importance of the supply chain etc. So the important issue for CPO’s/Heads of function to focus upon, is to build the capability of its staff to a level where they can make that vital link to the firms strategy and truly add value – under an appropriate name for each firm. With this capability achieved – the name will choose itself and become an irrelevant issue.
Nuff said …
If you would like advice on building capability and linking the procurement function to the business strategy to add real value from your procurement, send us an email at firstname.lastname@example.org