Procurement 2.0 offers a shift away from the traditional portrait of cost-driven and siloed procurement.
In the age of digital transformation and shifting consumer concerns, procurement 2.0 is a breath of fresh air. It is,
Procurement, with a higher purpose.
Taken from a blog post from several years ago, by Neil Deverill, Procurement 2.0 is described as a movement to actively engage management processes in the procurement activity. Addressing gaps in the previous flaws of the function, by having a CPO lead the management of new process implementation. This philosophy was seen as a way of effectively breaking down corporate silos and enhancing the value chain through procurement activities and strategies; raising awareness of the importance procurement fulfills to both product and market (Henshall 2010).
The post, by Deverill, was written a little over 7 years ago, and a lot has happened in the field since then. Nonetheless, the essence of the definition holds true. Without the enhanced engagement and shifts in management processes in the procurement activity, procurement would never have become such a crucial element of value chain growth.
I respect Deverill wildly, and the concept of Procurement 2.0 wouldn’t be on my radar if it weren’t for him. But, seven years have passed, and this wouldn’t be a Kodiak Community blog post without a bit of friendly redefining. Right?
So, here it is! My definition of Procurement 2.0, today:
A methodology (or guideline) for sourcing and purchasing — aided by emerging technologies — to procure materials with people, planet and profit as a key priority.
Procurement 2.0 has required a shift in a mindset, as much as it is a shift in strategies and activities.
Whichever way you slice it, a shift has occurred. And it’s time to take notice.
A new age of Procurement
Procurement has come a long way in recent years, particularly in aspects of technology and sustainability.
As new thoughts and innovations emerge, it leaves little room for ‘old procurement’.
Notice the image above — illustrating traditional procurement — has no mention of measures to ensure supplier sustainability or elements of sourcing responsibly.
Businesses globally have put more spend in the hands of their procurement teams; understanding that their activities and strategies can greatly impact both bottom and top-line growth. In the new age of procurement, CPOs are seen as innovation role models- finding, educating themselves with and implementing the latest technologies to enhance business critical areas. CPO’s management and decision making is increasingly crucial to the value proposition of their companies.
Along with a greater focus on technological advancements, procurement’s focus has shifted from cost efficiency, to establishing fair value (Estok 2015). In order to establish fair value, procurement teams must work to ensure their procurement is taking place in sustainable contexts. This means maintaining a standard for procuring materials that are sourced responsibly from suppliers ensuring their ESG criteria.
Responsible procurement and profitability have had a clashing coexistence in the days of traditional procurement.
Procurement 2.0 offers a new outlook on their relationship to one another. Simply, today, the two elements run parallel to one another, instead of being contentious values.
Because consumer trends have skewed towards purchasing from brands that focus on supply chain sustainability, there has been growing competition amongst green suppliers and buyers.
This has created a shift in the market. “An increasing number of suppliers have embraced sustainability as an operational philosophy, and that has changed pricing and market strategies” (Weissman 2017).
A new modus operandi for supplier and buyers alike has impacted the global market. Although Procurement 2.0 is an ever-changing philosophy, one can hope that responsible business practices and digital transformation will remain two of the staple ideologies within the future of procurement.
Not only for the sake of business stakeholders, but for the sake of society at large.
This is Procurement 2.0, as we Kodiak Rating sees it.
Have your own opinions regarding the post? Please, feel free to leave your thoughts in the comments below.
Until next week.
This publication is brought to you by author Sam Jenks, but also on part by Kodiak Rating — A Supplier Relationship Management SaaS functioning out of Stockholm, Sweden. Kodiak Community intends to challenge traditional business practices with innovative thinking and creation.