The Brave CPO:
(Buying Magician)

Procurements Place in the Value Chain

An interesting commentary from Spend Matters on procurements position in the supply chain which supports my own views (maybe that’s why I found it interesting). Namely, that procurement is the upstream part of the supply chain, where initial value is captured, whilst warehousing and distribution are downstream activities, that support delivery of initial value. Common sense really.

So, unless value is captured upstream it can not be delivered downstream – this is why procurement is in pole position in the supply chain. Unfortunately, many procurement organizations do not assert this pole position in their organization and so fail to influence the value chain. These organizations focus on increasing supply chain efficiency – but fail to see the big prize. That is a strategically integrated supply chain from suppliers through to the end customer. Porters view of procurement as a support function in the value chain should be discarded, and the following maxim embraced:

“We buy, we add value, and we sell” and we must excel in each activity to be successful.

Do you agree or disagree?

2 Responses to “Procurements Place in the Value Chain”

  1. A.Murfee Says:

    A good analysis, I loved reading your post.

  2. Tony Colwell Says:

    Porter’s original should be regarded as an example rather than a definitive model. It can easily be reconfigured to suit specific circumstances. In most cases procurement is best viewed a support activity. Don’t infer that this diminishes its importance; to the contrary, it provides critical support to all other activities, not just a preceding activity to inbound logistics.
    Your proposed update devalues procurement’s role.