Why procurement is the new black in business

Nina Hendy
@ninahendy

Procurement is experiencing a meteoric rise to prominence, with over 2.5 million active professionals working in a procurement role across the globe.

Viewed as an increasingly vital future-proofing tool in business, procurement has received greater emphasis over the last decade as organisations look for ways to be more effective corporate spenders, seek to create internal cost-conscious cultures and minimise corporate risk in our tough global economy.

So what is procurement? It refers to the acquisition of goods and services from an external source. While almost all purchasing decisions include factors such as delivery and handling, procurement generally involves buying decisions that make good use of economic analysis methods. This often means acting as the interface and conduit for the business with external parties and being agents of change and innovation within the business. Procurement people are just as much sales people as they are finance people.

While procurement used to be a job people fell into, there’s a new generation of procurement professionals who have actively chosen a career in this field.

While procurement used to be a job people fell into, there’s a new generation of procurement professionals that have actively chosen a career in this field. The growth is a result of businesses realising the potential opportunities for investing in dedicated procurement and the function becoming more widely known and recognised, with a range of new programs developed specifically for procurement in the education and training sector.

Procurement is an increasingly important function in business because these professionals are trained to predict the oil price, the dollar fluctuation, the continued rise in house prices and the impact of disruptive technologies on business, according to the founding chairman of procurement management consultancy The Faculty, Tania Seary. The Faculty is recognised as one of Asia-Pacific’s leading procurement advisors.

Chief procurement officers often control a company spend of between $100 million and $5 billion, putting them in a critical position to influence commercial and financial success, Seary says.

Chief procurement officers often control a company spend of between $100 million and $5 billion, putting them in a critical position to influence commercial and financial success.

Research indicates that companies with high performing procurement teams report profile margins of 7.12 per cent on average, compared with just 5.83 per cent for other companies, Seary says.

“Procurement professionals understand the markets and bring that information inside your business to scenario plan, identify trends and ensure the business is commercially sound into the future. High profile issues such as fast fashion, treatment of suppliers and labour practices are all procurement issues at their core.”

The make-up of your procurement team should mirror the business strategy you wish to follow.

“You need to consider which skills you need the most – expert cost-cutters, supplier relationship managers, or contract negotiators,” Seary says.

Nina Hendy

Nina Hendy is an Australian freelance business journalist and wordsmith who writes for BBC Australia, BRW, sections of The Age, Sydney Morning Herald and affiliated mastheads, SmartCompany, Private Media and Edge titles.

Image: Doug, Flickr Creative Commons license

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