Extreme Procurement

With growing focus on emerging markets, ‘extreme procurement’ will become more common.

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I was at an airbase in the desert when the call came in on my satellite phone: my regular security detail was stranded in Northern Iraq and wouldn’t be able to meet me when I arrived in Baghdad. My firm had won a tender to re-establish banking systems after the war – a great opportunity for us, a great contribution to rebuilding the country – but dangerous work. Western contractors like me were being kidnapped, tortured and beheaded on a regular basis. To travel without security would be suicidal.

Fortunately, a quick call to another of our suppliers established that they had a team available that could stand up at short notice to meet me on arrival. All that was left to do was to call the office in London to have the work order put through…which I did, to be told by a purchasing manager that as I hadn’t followed the firm’s required processes, that couldn’t possibly be done.

On that occasion, a fairly direct suggestion that he join me on the trip and see if he felt the same resolved the matter. With the anaemic performance of Western economies driving more and more businesses to seek growth in increasingly exotic locations, however, the challenges of what might be termed ‘extreme procurement’ are being faced more frequently by the profession and line staff alike.

In extreme environments, procurement is more important than ever

So should procurement butt-out and leave the people on the ground to get on with it? Far from it. In the more exotic emerging markets, procurement is more important than ever:

• The reputational – and legal – risk from engaging with suppliers who don’t meet the right standards, for example of workforce welfare, is significant, and this can be more common in less developed economies;
• Strict transnational laws on bribery and corruption require supply chain assurance – you need to know not only that your staff are not involved, but also that no one acting on your behalf is either;
• Costs can be far higher, and much more varied: the potential for savings is greater than in more settled supply chains;
• The rate of economic growth may require your business to move fast to capture the opportunity, in a fast developing market vital materials may be in short supply – effective procurement can make the difference between failure and success.

Rules are still needed – but they may need to be different rules

The requirements behind your organisation’s policies and procedures – compliance with law, good governance etc. – will remain. If it hasn’t operated extensively in emerging markets before, however, the way those principles are applied may need to adapt.

Reviewing the supplier landscape at an early stage will provide the best sense of this. If you make exceptions to some requirements due to, say, there being only one appropriate supplier in a category, make sure to insert a ‘sunset’ clause so the exception is revisited as the market develops. 

Check the practicality of your procedures

Having defined policies suitable for the circumstances, double check their practicality. If costs are significantly higher than in your home market, approval levels may need raising. If you have an exceptions policy, make sure those who can grant them will be readily available when needed – bearing in mind both time zones, and that Saturday and Sunday may be working days.

Get familiar with different cultures 

Understanding different cultural norms is crucial to understanding how business gets done – and how you can do business effectively. This isn’t just about the new countries with which you may be dealing: expats can also be a breed apart, those who open up the riskiest locations especially. Spend some time getting a handle on how all involved think and act – and you’ll be able to work out the most effective ways to get them on side.

There’s no substitute for first-hand experience

To be truly effective – especially if this is to be a major part of your business – you need to experience the markets involved for yourself. It may be a hard sell to your boss, the finance department and even the frontline staff to fly a ‘back office’ person out, but the case should be clear: procurement is more important than ever in these markets, for you to understand the supply landscape, you need to see it for yourself.

Exotic emerging markets are challenging, difficult, often dangerous and invariably highly demanding. Both for you and for your business, they can also offer unparalleled opportunities: for growth, for profit, for developing skills fast and for demonstrating your worth.

Now, where did I leave my flak jacket…

Stuart Brocklehurst is Chief Executive of Applegate Marketplace. His past roles have included Group Communications Director of Amadeus IT Group SA and Senior Vice President for External Relations at Visa International CEMEA.