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The End of Procurement?


For the better half of a decade, the world has been suffering under what is probably the most severe financial crisis since the Great Depression. Throughout this crisis procurement, as a function, has increasingly gained strategic and tactical importance. All of the sudden senior leadership, which previously was far too preoccupied with increasing revenues, noticed that every dollar or euro saved in expenses goes directly towards the bottom line.

Flash forward 5 years and many CPO’s have contributed billions to profitability, which in many cases has earned them a respected position in the company.

                                                                                                                                                    CPO’s are also realizing that savings can only go so far. At some point it will no longer be able to help drive year over year savings at the levels we’ve seen. This puts procurement at a crossroads. If it continues on the savings track, procurement as a function may start to lose its relevancy and at some point even disappear altogether. This was pointed out by experts in the report: Vision 2020,The Future of Procurement.

The Procurement function – as you know it – will no longer exist in 2020.

This increasing sense that procurement must evolve to remain relevant may explain the overwhelming interest in the recent ‘Beyond Savings’ webinar with Tim Tolhurst, CPO of Royal DSM. Royal DSM is a leading global Life Science and Materials company. (The recording can be found here)

With average annual savings topping 7%, procurement has been essential in saving DSM hundreds of millions of euros. Using scaling and intelligent reporting, which have a measurable effect on year-end results, Tim and his team have earned a well-respected position within the company. But they are also looking ahead, making sure that procurement will continue to deliver value to the company. In the words of Tim: “The period of intense leverage focusing on TCO alone will come to an end.”

Taking Procurement to the next level

Does your procurement team have the strategy in place to move beyond savings? Business intelligence plays an important role, as does de-complexing procurement as a whole. Only then will there be enough time and resources available for the game-changing initiatives that can ensure procurement’s future. Potential initiatives could include close supplier cooperation and a shift to managing risk. Watch the replay of the webinar to get inspired on how to take procurement to the next level in your organization.

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      Former Member

      Very interesting article and very good insights from the vision 2020 report. I cannot help but to think that procurement function and IT function follow a similar pattern: a lot of processes to be automated, a main focus on efficiency and cost savings and now they both gear towards participating actively into the bottom line and to being integrated fully in the business lines. Interestingly, procurement automation was enable by IT tools. On the other hand, IT automation and cost efficiency is driven mostly by the cloud.