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29 December 2014

Procurement leaders "facing new challenges and need new approach"

Content team

Procurement leaders are facing new challenges and must change their approach accordingly, an industry expert has claimed.

Gerard Chick, chief knowledge officer at Optimum Procurement, believes this is necessary if the function is to play an important strategic role in modern business.

Writing for Procurement Leaders, he said the increasingly complex nature of the B2B environment means procurement is required to optimise the balance between risk and cost. However, the expert warned that contractual arrangements cannot be expected to be sufficient in the face of all eventualities and circumstances.

"Both of these issues - risk and cost - are business-critical and procurement must play its part in the emerging debate on risk and cost management by means of the implementation of relational mechanisms, which will operate alongside traditional contractual mechanisms to support them," Mr Chick said.

He added that many business purchases are now bespoke and this means procurement must adopt different skills and competencies. Mr Chick claimed a performance mindset is required to allow the function to spread risk and reward sharing throughout the supply chain network.

"Contemporary procurement demands that procurement activity is freer, less proscriptive and restricted, more interactive and certainly much more about the long term," the industry expert stated.

Mr Chick claimed traditional approaches to procurement have done little to introduce new practices. He claimed the function now needs to move away from a pure focus on compliance and instead look towards long-term innovation and a closer strategic relationship with the supply base.

According to recent research from IBM, the best chief procurement officers (CPOs) should aim to become 'procurement role models'. The organisation found these individuals tend to prioritise revenue growth, competitive advantage and innovation and are more in tune with their constituents. It also said the best CPOs are able to draw on automation and analytic insights when assessing the performance of their function.

IBM found these procurement role models have a proven track record that can be measured in improved revenue and profit figures.

Content team, Bureau van Dijk

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