Procurement’s challenge – how to become a career of choice

Over the next few weeks undergraduates across the country will be sitting their finals and setting themselves up for the next stage of their lives with careers in differing fields. A few may become Procurement professionals but it is doubtful that many would have considered it as their career of choice. Indeed it seems that the old mantra for Procurement still holds true – it is very much something that people fall in to.

Clearly there is more to be done to market ourselves to students across the country. After all although Procurement may not have quite the same allure to it as Investment Banking, salaries are on par with functions such as finance and HR and the level of exposure possible to young graduates is well beyond the norm, helped by the quick progression of procurement up the value chain.

CEO’s expect far more of procurement than they did 5 years ago. They have challenges on their agenda such as raw material price volatility, pressure on profits, increasing risks and a need to innovate and become more sustainable. Procurement are well placed to lead on these challenges and CPO’s are being asked to generate cash whilst minimizing supply chain risk and leapfrogging competition.

As a result a fresh faced procurement professional can expect to be thrown in at the deep end, with high levels of responsibility and expectation as well as the pathway for progression that such experience affords.

There are downsides to this increased level of exposure. Procurement is often in the press as an object of derision concerning issues such as payment terms, supplier treatment, working conditions and general money wasting. We have to be careful here. Procurement can’t get into a position where it takes the rap for things when they go wrong but isn’t considered as a strategically important internal function – that most definitely wouldn’t be appealing!

So what can Procurement do to move from a career choice of the desperately undecided to one which is a wilful choice?  I think the answer is twofold.

Firstly, and most importantly, Procurement has to build on the momentum gained over the last few years and truly progress from a tactical function to one with a clear position in the Boardroom and beyond that offer a true path through from entry level graduate to CEO.

There is definitely not the recognition currently that CPO’s can progress on to the top role and I think it is primarily because procurement is seen as being far too risk adverse. “Taking a risk, having a punt, having a go”, virtues extolled by David Cameron on his recent campaign trail, may seem slightly tacky, but are necessary for anyone wanting to make the step up to the top job. Procurement in general should adopt more of this attitude. Hiding behind process and what has gone before is limiting the perception of what Procurement can achieve.

Inwardly then Procurement still has quite a lot of headroom for improvement however we are on the right trajectory. The second challenge comes in selling ourselves to the vast swathes of students who are currently taking their skills elsewhere.

There’s no easy answer here but the fact there are only a handful of bachelor’s or master’s degrees available to students in the UK can’t be helping matters. It is CIPS long stated aim to licence Procurement and in the long term, if this aim is realised, I believe that will help legitimise the profession and act as a platform for change.

The time frame for such licencing is hazy though and implementing it also has its complications. In the meantime we should look to enforce the view that procurement is an integral, strategic part solving the wide challenges a business may face.

The view that procurement is simply just buying does not marry up with the function in the 21^st century. The tests a buyer faces are broad and complex. From ethical dilemmas through to commercial appraisals, stakeholder conflicts and game theory the basis of being a good buyer will set you in good stead for a comprehensive range of senior roles – this is the message we need to be selling.

Will the transparency of payment practices lead to a change in corporate behaviour?

Would the behaviours of big business change if they were forced to report on how they paid their suppliers? Well we don’t have very long to find out as in 2016 new regulation comes into force which will require all quoted companies and LLP’s to do exactly that.

Over the last year there have been a number of high profile cases where big business has been accused of taking up the role of classroom bully. Mondelez has been taken to task, as well as Mars, Kellogg, Heinz, InBev and Tesco amongst others and their favourite practices does seem to be the extending of payment terms. Pre-crash 2008 there doesn’t seem to have been too much reporting on the subject and it would appear that while pushing out terms was initially used to ensure continued existence during that rocky period it has since turned into a valuable cash cow at a time of limited growth and diminishing profits. There is also a push to follow the pack, driven by the demands of shareholders and analysts. These businesses are vastly competitive and cannot afford to allow rivals to steal a march; especially one as tangible as this when pushing out terms can offer potentially tens or hundreds of millions of pounds to an organisations cash flow.

I am pretty sure that part of the reason organisations are able to do this is that they are mainly geared up adapt and react to the demands of their consumer. As it stands there is little information that is presented to the consumer that allows them to make an informed choice about whether they buy based on a firm’s payment processes, and as such not much that stops them in following this route.

I can however see this becoming more and more of a customer issue. We have already seen over the last year in the UK that Starbucks has been forced to change tact on corporation tax, based largely on the backlash from consumers. No one would have wanted press like that.

Customers put a large amount of faith in the organisations they choose to buy from and expect a degree of business integrity, ethical and social standards that they may not have considered 10 or 15 years ago. When a company is not deemed to have hit these standards in the eyes of the customer they don’t react well (recent examples such as “horse gate” spring to mind) and given the rise of social media and the transparency of information what may have been one person’s gripe in years gone by may now be a topic of interest to the masses.

This legislation change may well push the payment processes of organisations into the sphere of interest of the consumer. New information will be readily available to an attentive press corps to whom it should be no trouble to report on industry comparisons and the best / worst practices of big business. It is easy to see how one well-placed article might spark curiosity in the subject.

So will behaviours change? Well I have discussed before how focus on such a singular element of the working capital equation as payment terms is probably not effective in the short or long term and hopefully businesses start to agree. I would like to think that this legislation will act as an impetus to change as firms begin to see the negative PR risk from simply extending terms.

Procurement can take a lead in this area, helping to improve overall working capital through a collaborative supplier management approach. Business relationships need not be so one sided and the negative risks associated with them being so will come back to bite in this new world of transparency.