PROCUREMENT HEADS BLOG

What is Procurement?

The Definition of Procurement

Picture this. A group of men watching their sons on the side-line at a sports fixture, small talk being made, the conversation inevitably coming around to ‘what is it you do for a living?’. In my case it’s simple; ‘I’m the founder of Procurement Heads, a specialist recruiter of senior Procurement professionals.’ Blank faces. ‘Interesting!’… pause… ‘What is procurement?’

I think it’s fair to say that outside of the procurement profession its function, value and understanding is not widely known, which has led me to think why could this be? One obvious conclusion to draw would be that it’s a simple case of not understanding the fundamental phraseology that procurement represents; in simple terms, its definition. As the adage goes, beauty is in the eye of the beholder, or in this instance: the spend holder.

Perhaps this definition is further complicated by the plethora of other titles the discipline still answers to, including; Purchasing, Sourcing, Contract Management, Supplier Relationship Management, Buying et al.

See, already I’m going off piste!

A white paper published in Australia in 2005 adeptly summarised Procurement as being “the business management function that ensures identification, sourcing, access and management of the external resources that an organisation needs or may need to fulfill its strategic objectives”.

Furthermore, it identified 3 key areas of activity:

  • Pre-contract activities such as planning, needs identification and analysis, and sourcing
  • Post-contract activities such as contract management, supply chain management and disposal
  • General activities such as corporate governance, supplier relationship management, risk management and regulatory compliance

‘Crystal clear!’ I hear you say, or is it?

Whilst the headline definition might seem more obvious, the component parts that make up a function vary enormously from one organisation to the next and this is where the blurred definition can arise.

We engage with a multitude of Procurement leaders every single day and as a result, it’s not uncommon that in the space of 10 minutes we’ll speak to two Procurement Directors in different businesses that have very different ideas of how Procurement works. The first will advocate, ‘we have most of the big suppliers under contract so we’re all about Supplier Relationship Management!’ The second will proudly declare, ‘we’re only interested in savings, so we’re all about negotiating with our suppliers!’

With such conflicting views within the profession itself, is it any wonder dads on the side-line still look puzzled?

Some of the above can be attributed to the maturity of a function. Mature Procurement teams might be further down the line with embedding strategies whereas newer teams might be pedalling hard to demonstrate return on investment. However, modern Procurement is a veritable chameleon. It evolves and morphs to the requirements of an organisation, aligning itself to both the business strategy and partnering functions, to enhance performance. It also mirrors and reacts to macro-economic trends, constantly addressing supply and demand (best not to mention the Brexit elephant in the room here).

Whilst I often find myself craving a more uniform definition, I do understand why this might not be possible with Procurement. As Henry Ford once said, “A customer can have a car painted any colour he wants as long as it’s black” – and wonderful as this quote is, some 100 years on it seems out of kilter.

Procurement is rich and diverse, broad and deep, unashamedly ambiguous, responsive and reflective, but above all it is at the forefront of everything organisations should now be focusing on.

So I have chosen to celebrate Procurement’s varied definition and will continue to proudly advocate for all that it can deliver.

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Rupert Gaster