The Rise and Rise of Procurement

People in Procurement have come a long way since simply being the part of an organization who find the most cheaply priced services and goods possible. Now procurement has become strategic, and Josh Hyatt of CFO Magazine explains how and why. With a more “globalized perspective”, procurement has run into a more economically complex environment of business. To counteract that, it’s needed to not only continue the normal operation of procurement, but also optimization: In a postdownturn economy, reining in costs becomes more complex; the chopping block has already been rolled out one too many times. Procurement executives need to figure out how to leverage limited resources and restructure activities to add capabilities without adding cost. “Procurement works more with suppliers understanding when we need them, where we need them, and which are the economies of scale that we can take advantage of, either by volume or by other synergies with the suppliers,” says Bill Velasco, division controller at Flowserve, a $4 billion supplier of industrial equipment. Beyond working more closely with suppliers, the new model of procurement lifts the function above executing purchase orders and into the lofty realm of strategic planning, getting closer to operations, sales, and technology. By becoming better aligned with the business, procurement executives gain a fuller understanding of the company's future sourcing needs: What are the core technologies? Who are the key competitors? Which geographies best serve the company's long-term goals? Citing a survey performed by CFO Research, there is an increase in how companies view the value of their procurement executives and groups, and an increase in the working relationship between them and the rest of the organization. The question becomes : are you ready for the rise of strategic procurement yet?

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