It’s only a matter of time before the procurement profession realises that it’s dehumanised the sourcing process, a move that will negatively impact the industry.
Procurement needs a new measure of success that reflects its impact, not its output. This is according to a Melbourne-based procurement coach, and self-proclaimed procurement disrupter, Matt Perfect.
Procurement with Purpose
Just as conscious businesses are learning that profit is a by-product of business with purpose, so too savings will be a by-product of procurement with purpose.
Perfect argues, “What have we really ‘saved’ if we drive down our suppliers’ pricing to unsustainable levels?
“Levels where they are forced to compromise on service and quality, or worse, safety and ethics? Procurement needs a metric that reflects the exponential impact of its decisions throughout the supply chain.
“The impact on suppliers and their employees…and suppliers’ suppliers and so on. This metric must measure real human value. Not just economic value,” Perfect says.
Cost at Any Cost
The Melburnian has carved an enviable niche in the Australian procurement landscape. Perfect has worked in numerous procurement roles, including for FreeMarkets, National Australia Bank, Toll and The Faculty.
Now as an independent coach and facilitator, he advocates the importance of supplier relations, and feels that major disruptive change within the procurement industry is only a matter of time.
Perfect writes about the disruption of the procurement sector in white papers. One, titled Supplier Love and Why You Need More of It, published in July last year, explains that as much as 70 per cent of revenue now goes to third parties (according to Proxima Group). Never before have suppliers been more important stakeholders in an organisation’s success.
Yet, despite significant investment in procurement capability and strategic focus over the last few decades, many supplier relationships remain transactional at best and at worst, adversarial.
Businesses continue to prioritise shareholder value above all else, sometimes even at the expense of customers, employees and the environment, but almost always ahead of suppliers’ interests.
One might be forgiven for thinking that ‘cost at any cost’ is the primary operating model for these businesses.
Conscious businesses understand that this is not sustainable. Fortunately, there is a better way, but it requires a fundamental shift in the way we define stakeholders and value.
“We need to be looking at ways to win the hearts and minds of suppliers, rather than purely relying on negotiation tactics. When you look at the mindsets of procurement professionals, relationships just aren’t playing a big enough part at the moment,” Perfect says.
“You need to look at supplier relationships and help improve those relationships to get better outcomes. I work to improve that level of trust in a relationship, with the view of generating greater impact. I also look at the broader impact of relationships, which comes down to how it affects the lives of people.”
Perfect says that procurement is ripe for disruption, and is in fact on the cusp of a major shift. Part of this shift should include the consideration of whether procurement accurately sums up the role – supplier relations could be closer.
“There will be a shift to a new age. A human age, which is a process that procurement doesn’t have its head around yet as a profession. We need to be more engaged with vision and purpose moving forward as a profession.”
Perfect believes the younger generation will drive the changes as they strive for a more human-centred career.
Remembering the Human Element in Sourcing Process
A focus on supply chain issues, and the human elements within supply chains, is another driver for change.
Other industries embrace change more readily than procurement has to date. Marketing, for example, understands that to be really effective and cut-through, it has to touch the lives of people.
The human relations industry has also moved away from seeing staff as a number and has improved the way it operates within the business environment by focusing on the people. Procurement hasn’t made this leap yet, he says.
“We’ve also got to be thinking about how to appeal to the hearts and minds of consumers. We need to head into this space as a broader industry if we’re ever going to survive. I urge my clients to be the change they want to see in the world.”
At the moment, the industry is narrowly focused on shareholder value, rather than a broader stakeholder orientation, which is drawn from the realm of conscious capitalism.
“There needs to be an interdependence that creates value without trading off one another,” he says.
People Over Process
Perfect has an undergraduate degree in economics from Cardiff in the UK, and pursued a consulting career before landing an analyst position, specialising in e-sourcing and online technology. This kick-started a procurement career spanning multiple consulting and management roles in a variety of industries.
He left The Faculty a couple of years ago to focus on coaching. He works to help his clients create better and more conscious relationships with their internal and external stakeholders.
“This is where I focus my energy now. Looking at all spending in procurement and how that impacts on people. I believe we all need to have a greater focus on people than process.
Since working as a procurement coach, Perfect has worked with Social Traders, CPA Australia and The Trusted Negotiator, among others.