I love procurement
With my first TV memory being THE moon landing, all I ever wanted to do was buidling rockets and space ships. And as a side note, I am very grateful for Apple TV’s For All Mankind to show us what might have been as opposed to the watered down version of post-Apollo that we got.
Anyway, when I graduated, it dawned on me that I had been born either to late (missing the original space race) or too early (looking at what is happening now between Space X and Blue Origin, I was right about that one).
Consulting appeared like an interesting option, so I applied and was accepted. In those days, you were not asked what you wanted to do but you got assigned to a project. Mine turned out to be a strategic sourcing project at Daimler and I wrote about this in my previous post.
Once I understood what procurement is, I started loving it and after 25 years as a procurement consultant, I still do. In this post, I am outlining why I believe that procurement is a fantastic career choice both for industry people and for consultants. And I will outline how procurement can take you to the very top of your organization. There also is a recent video on this topic on my YouTube channel.
1. Savings impact
If you know which levers to pull, there always is a way to deliver savings that are much higher than everyone expected. And this will get you on the good side of the CEO and the CFO. They can use the savings to invest in new topics of plug some holes.
You may argue that savings are transactional and that procurement should be about much more than just reducing cost with suppliers and I totally agree. But big savings early on can buy you the most valuable currency - credibility. Once you have the reputation for being able to deliver, key decision makers will trust you with other, more qualitative objectives. I will come back to those further down in this post.
The ways to deliver savings have undergone a remarkable evolution. When I started 25 years ago, 7 step sourcing was front and center and it put a heavy emphasis on opening up to international suppliers and on preparing negotiations really well. It was effective but took its sweet time. Project lead times of eight to twelve months were not unusual.
Today, savings need to be delivered much faster. I believe that the Purchasing Chessboard brought a lot of badly needed clarity on how to select the right strategy to reduce cost with suppliers. And together with my colleagues Alenka Triplat, Wolfgang Schnellbächer and Daniel Weise, I am in the process of rolling out a new approach that is drastically faster.
2. Gain insights
If you really want to be successful in procurement, you must go beyond just delivering savings and this starts with gaining insights into the company. The two key tools for Procurement executives are a cup of coffee and and airline ticket.
The cup of coffee is a proxy for spending quality time with internal stakeholders in order to truly understand how the company is delivering value to its customers. The airline ticket stands for going out to suppliers to truly understand how they deliver value to your company. Once you understand these two key aspects of your job, you can place yourself right at the intersection and you will be highly effective.
This expansive view on procurement goes far beyond the traditional more transactional role of the function. CPOs who proactively gain insights into their company and their suppliers are ready for the next step. An old mentor of mine once observed that “The key qualification of a CFO is to be ready to succeed the CEO” and I believe that the same holds true for a CPO. Looking at the current CEOs at Apple and VW confirms that assertion.
3. Shape the future
Today, every company is a tech company. Leveraging innovation from external suppliers is a must. The question is, which function is taking the lead. One of my clients let me participate in his town hall meeting a couple of years ago. His key message was that while the company spends $1B per year on R&D, the company‘s tier 1 suppliers spend $25B per year on R&D. Gaining access to the resulting innovation is key to the future of the company and there is no doubt about which function was tasked with taking care of this - procurement.
The topic of having a seat at the table with engineering comes to mind. Many procurement people complain about being involved too late in the product life cycle. Often, engineering has already taken all decisions and procurement is limited to just handling the transaction. Then they ask for new roles and responsibilities. But this misses the point. The key to shaping the future with engineering is technical competence. Procurement people need to have intimate knowledge about the product they are responsible for. If you buy steel for example, you need to know how steel is made. You need to know steel grades. You need to know the key people at key steel makers. You need to know how to shape steel. You need to know the key people at key tool makers. You need to know the key people at key companies for surface treatment. You need to know the key people at key research institutes. If you tick all of these boxes, nobody will ever wonder if you deserve a seat at the table.
4. Interact with CEOs
Procurement offers incredible learning opportunities. If you cover 1, 2 and 3 as outlined above, the CEOs of your top suppliers will notice and will want to spend time with you. I am pretty sure that no other function lets people who are at an early stage of their career interact with CEOs at such a regular basis. And if you spend quality time with CEOs, if you challenge them and let them challenge you, their „CEOness“ will rub off on you. This in turn will contribute to making you ready to become a CEO yourself.
Talking to CEOs is not a vanity project. It is high time to bring procurement back to its roots. In essence, procurement is an activity where two business leaders agree on a joint vision of the future. Over the past decades, an over-emphasis on categories and analyses has made procurement abstract, slow and transactional. If you talk directly to the CEOs of your suppliers, you can make unusual things happen. Watch this video if you would like to learn more about this topic.
5. Invent new ways
Procurement still is a fairly new topic. There is precious little research. Hardly any university teaches procurement. There is a lack of meaningful literature. At the same time, being effective in procurement requires you to master topics as diverse as engineering, manufacturing, supply chain management, data science, psychology and strategy. As a result nobody really knows what good looks like in procurement.
This is a great opportunity to invent new ways of working. Take me as an example, I wrote my first procurement book (in German) less than eight years into my career as a procurement consultant. It did not leave a dent in the universe but it gave me the skillset to write books. Without this initial experience, there would be no Purchasing Chessboard. There is easily room for several dozen procurement books covering different aspects of the trade. Stake your claim!
