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"Commonsense" Procurement

Somehow, in the flurry of fast evolving technological changes and other environmental distractions, the four fundamentals of procurement (which I call "commonsense procurement") have been relegated to the background.

In the last few years, Sourcing and Procurement, just like most of the other business functions has been immensely influenced and impacted by numerous internal and external factors like fast changes in technology, changing products and services, shorter business cycles, cost pressures, ever changing customer behaviors, and macroeconomic changes. All this has brought in quite a significant change in the procurement organizations like more investment in new procurement tools and technologies, frequent restructuring of the organizations (including downsizing and outsourcing), new skillsets, additional focus on governance, emergence of global / virtual teams, new suppliers, and new engagement models.

But most of these changes are ornamental when measured in terms of real value add to the business. The effectiveness of any procurement function is still governed by the four fundamentals - strategic sourcing, contract management, supplier management and order fulfillment. As long as the procurement organizations are doing these four things well, they are assured of good results. These results could be improvement in organizations' bottom-line or TCO (Total Cost of Ownership), supplier rationalization, better contract compliance, better supplier risk management, collaborative supplier relationships or better stakeholder management. The new technologies like Automation, Robotics, SMAC (Social Media-Mobility-Analytics-Cloud) are just the paraphernalia to the fundamentals. They are not the core or substitutes to the fundamentals.  The success and effectiveness of procurement organizations is still governed by how well the fundamentals are performed.

This is where procurement leadership and talent have a key role to play. As long as a procurement organization has the competency to understand and deliver to the fundamentals, it shall contribute and play a vital role in any organization or business. But it's not as simple as it sounds. Somehow, in the flurry of fast evolving technological changes and other environmental distractions, the four fundamentals of procurement (which I call "commonsense procurement") have been relegated to the background. There is a lot more focus from a resources standpoint on the new "procurement gizmos" rather than demonstrating and executing "commonsense procurement". This has directly or indirectly led to mediocre output and dilution of procurement loci standi as a strategic corporate function.

Therefore, the question I have - why is it so difficult to focus and demonstrate "commonsense procurement" when the real value lies in it? Curious to get your thoughts and comments.


Interesting thought process of clearly highlighting the commonsense procurement, where most times we miss the fundamentals

Right kind of Assessment at every level is the key to further enhance the effectiveness and strengthen the pillars. Regular visits and gauging the outcomes and relate to the Vision would give a good heads up and help mitigate risks accordingly.

Excellent topic. Yes we are forgetting our brain in lieu of technology. We should always ensure that we have taken cognizance of our own common sense.

Well written Avnish. I also agree on four fundamental things that are real core and other things are peripheral only. I would add fifth fundamental as create IPs / intellectual properties for their firms and suppliers. Procurement, in the new economy, must generate this through power of their key supplier networks.To your question, answer is that since most procurement functions are often not enabled or unable to do these 5 things, they park themselves under peripheral jargons to buy some more time.Keep writing.

Very true, the basics of real values are forgotten but new lingo's are created by breaking up "commonsense procurement". Often customers are skeptical to outsource end to end to the same outsource provider for various reasons that leaves with limited scope for the service provider to prove and be in the game. Having said that, I agree to the fact that benefits are minimized by compromising on Procurement values.

Avinash, the four fundamentals of procurement which you are terming as the Commonsense procurement, I believe is in itself, mostly the complete cycle of Supply Management. Now to your question why is it difficult, direct answer is,because it is not simple. Though there are high level standard processes,it should be everytime adapted to match the organizational needs. And I believe it is in here our skills as Infosys BPO (IBPO) plays an important role. Every organization can think and plan only to the extent within their organizational limits and/or the knowledge gained through various seminars these personnel attends. Unlike that we as IBPO with team of experts with various industrial and categorical knowledge which is also continuously being upskilled, provide rights solutions to our clients, making it EASIER to our clients, there by providing the real value. Many large organizations has realized the need and value in services provided by experts like us IBPO....

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