Procurement
May 14, 2012

Procurement reaches the next frontier

Our fascination with the future has long roots. Back in the days of boxy televisions, we all tuned in to watch Star Trek. The gadgets and gizmos mesmerized us. We secretly knew that the technology imagined by science fiction was just around the corner and our lives would never be the same.

In public procurement, we don’t have our own version of Star Trek, but we have something almost as good: private sector procurement. In the last few decades, private sector procurement has led the way in innovations and transforming procurement from “buying things” (and reporting through finance) to strategic procurement (and reporting to its own vice president).

In 2010, Ariba, a major consulting firm specializing in spend management, assembled a group of leading private sector procurement executives – a bunch of Captain Kirks, if you will – and asked them what procurement would look like in 2020. The group included seasoned procurement executives and what some consider today’s vanguard, chief procurement officers in charge of high performing spend management organizations.

The next frontier
Not all of their ideas are new, but the executives identified ideas they believe will be the drivers of procurement transformation. Here are three issues discussed in their report that we predict will influence the shape of public procurement over the next decade.

1.    Risk will become more visible and a larger factor in rewards, RFPs, vendor evaluations, contracts and performance measurement. As the new spend management pros get better at segmenting, defining and measuring value, they will begin to incorporate both gain- and risk-sharing into commercial relationships with suppliers.

Beyond sharing risks and rewards in contracts, some suggest they will accept greater risk in commercial relationships with critical suppliers by leaving out all the classic kinds of legal protections that can de-motivate suppliers.

Alongside the general awakening around supply-related risk comes more agreement around how to measure risk, more readily available third-party information, and networked communities where people pool data for operational risk assessment.

Former MetLife CPO Roy Anderson believes that acquisition, aggregation and management of risk-related information will transition fully to third parties and networked communities in the coming decade. “We see an awful lot of work being done today on the risk side, but we are never going to be risk experts, so it is a waste of time to create our own supplier-risk profiles.”

2.    Everything will be automated, reducing transaction costs and freeing up valuable, highly trained procurement staff to deal with major issues, problems and strategic initiatives.

“Procure-to-pay (P2P), sourcing, contract management and other automation engines will be de rigueur in 2020; they will be integrated up and down supply chains, fully adopted, providing full transparency and real-time insight.”
 
As Debbie Manos-McHenry, chief sourcing officer for Huntington National Bank, envisions it, procure-to-pay systems will be open architecture, web-based, and able to interface with many systems; routine purchase transactions will be done by end-users with little to no involvement from sourcing; systems will enforce appropriate compliance, workflow and rules; contract management and administration will be highly automated, using templates and collaborative tools in traditional redlining of agreements between buyers and sellers; workflow will enable end users to produce agreements that meet minimum criteria while exceptions will be escalated to sourcing; and risk evaluation and assessment will be built into systems and processes

3.    Goodbye products, hello solutions: public entities will tap into vendor expertise to harvest benefits not previously available.

Suppliers will continue to take on bigger pieces of things they already do for their customers. Think of it as integrated supply on steroids, where suppliers step out of their comfort zones to drive customer performance.
 
“I expect to see a lot more total solution-type relationships with suppliers, whether it’s an OEM, a third-party distribution partner, or a marketing partner,” says Larry Welch, former vice-president at Hewlett-Packard. So, for example, a supplier of printing hardware for the office will either morph into – or be replaced by – a supplier of total print-management solutions. The solution provider will take on the responsibility for things like optimizing office productivity in the placement and quantity of printers; reducing total printing costs from a 360-degree perspective; and developing and implementing printing best practices within the customer’s organization.

We don’t need to be Star Trek creator Gene Roddenberry or to have our own space ship to transform public procurement. We don’t even need more or better technology. Sometimes all we require is the ability to see where we need to go next – be it better control of risk as we suggest or something else specific to our organizations. With that and the help of a few “Scotties” (or excellent procurement engineers) we can build what’s needed to get there.

About this author

0 comments

There are no comments for this post yet.

Be the first to comment. Click here.

Procurement
 
By June 2017, the Public Engagement Team at the Privy Council...
 
We are excited to share with you the May/June issue of...
 
Over the past decade, major Canadian procurement projects have encountered increasing...
 
We are excited to announce that the October issue of Canadian...
 
Does your organization have a very narrow view of what digital...
 
In the last few years, we’ve seen various federal governments warning...
 
In this special episode of CGE Radio, your host John Jones...
 
Commodity Management (the official term for life-cycle asset management of goods...
 
Risk is always present in any undertaking, no matter the size...
 
The North Atlantic Treaty Organization, with its 28 independent member countries...
 
Strategic Procurement, recognized in recent years for its promotion of intelligent...
 
Even as talks between the government and federal workers affected problems...
 
The largest effort in 20 years to seek public input on...
 
July 27 was pay day some federal public workers that finally...
 
The government has to move quickly in replacing its fleet of...
 
The Liberal government is taking steps to rein in the National...
 
Canada is severely in need of a maritime vessel that can...
 
By Jason Zhang  The best way to cost effectively manage the retention...
 
Veterans Affairs Canada is not adequately managing the drug component of...
 
Some public servants will have to request their departments for emergency...
 
A research project at that explores the design and feasibility of...
 
The facility of a top-secret military communications group in Borden, Ontario...
 
While Dwight D. Eisenhower’s famous remark that “Plans are nothing, planning...
 
OMX , known for disrupting supply chain management primarily in the defence...
 
It took me more than 20 years in the public service...
 
I have often written about what to me are the unusual...
 
The release of the Defence Procurement Strategy (DPS) in February 2014...
 
It is amazing how much information goes back and forth between...
 
In April 2014 the Environics Institute and the Institute on Governance...
 
The president of the Treasury Board gave a speech in November...
 
Last month I supported the argument that if a received bid...
 
Roy Wiseman’s blog, “In defence of direct negotiation,” on the CGE...
 
As difficult as they may be to accept, we all know...
 
When the government introduced the Defence Procurement Strategy in February, it...
 
I used to be responsible for managing the s9 delegation file,...
 
Last spring the government adjusted its approach to defence procurement, creating...
 
From time to time, the popular media jump on examples of...
 
The early May annual workshop of the Canadian Institute of Procurement...
 
Ten years ago I was as member of the Parliamentary Secretary’s...
 
Benjamin Franklin said that “in this world nothing can be said...
 
“This is urgent,” the poobah said. “If you don’t put this...
 
Last month I wrote about accountability for procurement. I like this...
 
A procurement is designed to deliver specified results to a client....
 
Kudos to the President of the Treasury Board for announcing that,...
 
At the May 2013 Canadian Institute for Procurement and Materiel Management...
 
You’re in a crunch to meet a looming deadline. A couple...
 
How often have you seen buyers use years or months as...
 
As the organization in National Defence responsible for procurement and management...
 
In my time the almost automatic response to austerity was to...
 
Government supply chains, in defence and elsewhere, are increasingly becoming interconnected...
 
A year since my last article on defence procurement, positive change...
 
Public Works has started a project that tries to fix an...
 
In the March edition, I put forward three stories about process...
 
My previous articles have talked about process and results-driven procurement, and...
 
Good procurement takes good people using the right tools at the...
 
When I retired there was no one to whom I could...
 
Canada’s new Chief of the Defence Staff has been mandated to...
 
Over the past 40 years federal procurement has incorporated many measures...
 
Preparing a detailed procurement manual for a client is like trying...
 
…well, maybe not – but there is a link. Governments must...
 
Purchasing card (P-card) systems provide decreased costs per transaction, higher purchasing...
 
Are you going to the IPAC annual conference in St. John’s...
 
Procurement is a strategic issue in the public sector. The expenditures...
 
What constitutes excellence in public procurement? How is it measured? You...
 
Every jurisdiction has a public procurement policy. In its simplest form,...
 
Government executives are responsible for ensuring the integrity of the procurement...
 
There is defence procurement, and then there is Defence Procurement. The...
 
We all know the story, the one about the high-risk project...
 
How do you know what you don’t know? How do you...
 
With few exceptions, public spending rightfully requires competition and due diligence...
 
We all know the music and the steps that go with...
 
Procurement today is often like buying horses from Thomas Hobson in...
 
Don’t pay for what you can get for free. We’ve heard...
 
Our fascination with the future has long roots. Back in the...
 
Once upon a time, the King was looking for a really...
 
Like any small part that runs our cars, procurement is largely...
 
Many policy organizations have learned from sad experience that the best...
 
Effective public procurement can be “make or break” in developing countries...
 
Anyone who has been told by a doctor to lose weight...
 
When he was younger, our son liked to play with Rubik’s...
 
Sore losers: we all know they like to involve their lawyers...
 
The New West Partnership (NWP) cements the West as an economic...
 
Canada’s shipbuilding industry is now on the cusp of resurgence thanks...
 
In most democracies public procurement is expected to be fair, transparent...
 
In 2005, an Ontario government-sponsored task force generated a number of...
 
Recent high profile troubles at e-health operations in both Ontario and...
 
New ways to incorporate value into projects are maximizing the value...
 
The next time you hear someone argue that government procurement has...
 
Some title Some author
Some excerpt
By June 2017, the Public Engagement Team at the Privy Council...