The Procurement Puzzle

While many business leaders enjoy the thrash and thrall of business and trade, it seems that procurement doesn't make the grade, excitement wise.

I say this from experience as a Business Consultant who has sought to align and improve procurement processes in many businesses and had many an interesting exchange with senior business leaders who are like a tired child on a hot day when it comes to procurement.

Of course they know about procurement and expenses fraud, theft, multiple invoicing, disclosures of confidential information and collusion. They know about parked capital, hedging and safety stock. They know about inventory obsolescence. They know about best value buying not being achieved, poor procurement efficiency and weak cost control.....but it simply doesn't float their boat, why?

In many cases where optimisation was a strategic imperative, procurement was skirted around, treated like a sensitive, favourite child, whilst headcount and asset reduction were seen as easy meat, why?

My personal experience of leaders suggests that procurement has 'black box' status, which can only jump up and bite those who seek to open it up. Leaders don't know enough, have little relationship with it and generally regard it as complicated, messy and full of hidden menace. Bit like IT I suppose.

They also feel exposed when procurement issues and processing errors are discovered. I know several cost controllers who have been treated very badly after highlighting mistakes and losses which were avoidable or recoverable.

It seems like leaders are highly sensitive to these professional controllers, viewing them with suspicion and disdain.

In one case I dealt with, a cost controller was blocked from the ERP system when investigating invoicing mistakes and found £100k in un-billed work, £3,000,000 as project margin increase because of costs being twice what was being accounted for and chargeable to the client, and £400K additional revenues for variation orders with another client. In another case, cost controllers who more than paid for themselves by their work, were made redundant, why?

ERP systems are of course the infrastructure of procurement and getting alignment, control and regulation on use has proven difficult, with local preferences, legacy systems, non-adoption (using Excel/Word as an alternative) and poor adaption some of the issues that are commonly faced, but why?

The puzzle for me is why?

Business leaders have never been better placed to achieve performance in procurement. ERP system alignment, simplification, automated detection logarithms, disciplined procurement and strong cost control are much easier to install now, with blockchain and AI likely to make things much simpler in near future.

It is beyond time when the CFO, Head of Procurement and auditors cease to be left to address procurement. It is time when the CEO and Managing Director bring openness and transparency to procurement and regard these as a primary strategic imperative.