Is Procurement Just Another Part of the Supply Chain?
With terminology used interchangeably and misconceptions over their relationship, it can be hard to separate procurement and supply chain. But could confusion be reduced by understanding that procurement is just another part of the supply chain?
Chief Procurement Officer or Head of Supply Chain? Supply Chain Lead or Category Manager? Or does it not matter because these roles are basically the same anyway?
Where you work and study will impact how you understand the relationship between procurement and supply chain. Some organisations have procurement teams that are called ‘supply chain’, while others use procurement as a catch-all for everything from purchasing to warehouse management.
The confusion over what to call these functions signifies a lack of understanding of what they do on a daily basis. Even now, the public is only getting a better understanding through hearing about how supply chains are either saving the day during a global pandemic, or being disrupted by external factors – so much so that Christmas is teetering on a knife-edge.
What’s more, the confusion has led to terminology for the two functions being mixed up or mistakenly used interchangeably when considering two key business areas that are frequently viewed as separate, and yet are intrinsically linked. How, then, do we separate these two entities? And do we need to? Or do we need to understand that they can be part of the other, without being detrimental to either?
Working together, not standing alone
First, let’s set something straight. If you happen to think that procurement is ‘just’ one part of the supply chain, you are wrong. Yes, procurement is one part of the supply chain process, but it is as critical as any other. Considering one without the other can lead to lost opportunities for organisations.
Recently, Procurious hosted a live webinar, sponsored by Coupa, about this very issue: a distinguished panel of guests to discussed the current standing of these functions, how organisations are understanding the relationship between the two better, and questioneding if procurement and supply chain are destined to be together, forever.
Kathryn Mouton, Senior Manager within Accenture’s Intelligent Platform Services Organisation, believes that much has changed over the past five years. Previously, organisations would have treated procurement and supply chain as separate entities. Now it’s far more common to have one, cohesive function, governing all processes.
It’s something also experienced by Erica Stuart, Senior Manager of Network Optimization at Orica. The traditional misconceptions that procurement existed as a standalone function are now being corrected. Not only does this create an integral relationship between procurement and supply chain, but it also enables other groups to be brought into the fold too.
Viewing procurement and supply chain as part of a wider value chain allows organisations to drive more effective management of both: reducing operational silos, and improving collaboration through a greater understanding of the overall supply chain requirements. As more organisations move in this direction, the understanding of the distinct roles of both functions can only become clearer.
The good, the bad, and the ugly
This is not to say that by having a better understanding of the functions that things will always run smoother. There will be crossovers, redundancy in tasks and processes, and there is always a risk of silo mentality and entrenched beliefs. Issues are still seen where responsibilities need to be fully defined at an organisational level.
Karina Harris, Director of Customer Value for Coupa Software, has experienced both conflict and hard conversations between the functions resulting from negative impacts during transformation programs. Conflicts also arise, according to Kathryn Mouton, where organisations still treat the functions as separate entities. This leads to competing agendas and resource constraints, which ultimately impact the ability of both functions to deliver for the business.
However, there are plenty of examples where procurement and supply chain are working closely for collective benefits. Harris noted her experience of good discussions around the potential of getting aggregated spend between the two functions. Mouton’s experience aligns with this when considering sharing information and data for collective gain, as this leads to greater efficiencies and planning across the supply chain.
So, happy together – forever?
It would seem that procurement and supply chain are increasingly working together to achieve common goals in a way they haven’t done before. But how can organisations make this happy partnership last? Is there a secret to success?
Erica Stuart believes there are three key factors to create, and more importantly maintain, this strong relationship. The first is a shared desire for supply outcomes, in which all teams and their members understand their roles and the impact they have on the organisation. Once this is in place, the next factor is strong supply management – understanding the skills within the team and what they need to do to achieve best practice.
The final factor that Stuart sees is the importance for flexibility. There will inevitably be overlap in tasks and teams, but the great teams will be flexible enough to accommodate this without it impacting negatively on performance. Technology can play a role in this collaboration, says Karina Harris, particularly when it comes to data and the supply chain, aiding conversations between the two functions.
But is the relationship built to last? Our experts all agreed that there was no reason why it shouldn’t persist. For Karina Harris, the ultimate goal of procurement and supply chain is to get the right product in the right hands at the right time and at the right price, something that is only achieved with people collaborating and communicating to work together, a goal that Erica Stuart and her team are continuously working towards.
Kathryn Mouton believes that the only way forward for organisations is for this to continue and not regress to a situation where the functions were split. But for her, it goes further than just a happy relationship between two functions to a closer relationship across the whole organisation, enabling growth for everyone.
It would seem that procurement and supply chain are, in fact, destined to be together forever. And that can only be a good thing for organisations that follow in the footsteps of our thought leaders, and fully embrace the benefits that a long and happy relationship brings!
To hear more of the fascinating panel conversation, watch the Procurement + Supply Chain: Together Forever? webcast, now available on-demand.
Find more Back To Basics news, insights, and best practises at Procurious.com
