In brief - Professional procurement increasingly shaping strategy and decision making
Australian companies are catching up to their counterparts in the USA and Europe, where procurement enjoys a high profile as a professional and business function.
Professional procurement's slow rise to prominence
In October 2014, the (newly accredited) Chartered Institute of Procurement & Supply held its annual conference at Rosehill Racecourse in Sydney.
The keynote speaker was none other than Rio Tinto CEO Sam Walsh, who started his career as a buyer for General Motors Holden.
No, he was not buying cars, he was buying the things that GMH needed to make cars, and generally, run its business. From starter motors to paper clips – some seemingly more important than others, but each item in a company's procurement ecosystem has a role to play in creating end consumer value.
Earlier in October 2014, the Australian Financial Review's Rear Window column ran a piece on the profile (or lack thereof) of the Chartered Institute of Procurement & Supply. Impressive then, that they got the CEO of Rio Tinto to speak – Twiggy Forrest also tuned in to speak via video about this Walk Free Foundation and Victoria Cross recipient Corporal Mark Donaldson gave a motivational talk.
Maybe Rear Window should start looking out front instead?
Procurement focused on strategy, governance and risk management
Procurement enjoys a high profile as a professional and business function with company board heavyweights in Europe and the USA. It is common in Europe and the USA to see the Director of Procurement sitting on the board or reporting directly to it.
Why then has Australian business been so slow to understand the importance of this vital corporate function which has such a profound impact on the bottom line?
Perhaps those days are now over, with more and more Australian companies recognising the value add of professional procurement as an important part of any well managed corporate entity.
Professional procurement is less about procuring at the lowest price point and more about strategy, governance and risk management.
Professional procurement underpinning critical supply chain relationships
Mr. Walsh told his audience at the Chartered Institute of Procurement & Supply that Rio Tinto’s procurement officers spent $26 billion on goods and services in the 2013/2014 financial year. As he pointed out, that is more than the combined GDP of Malawi, Swaziland and Rwanda.
From the bits consumed internally (coffee and paper clips) to the bits consumed by the consumer, professional procurement is increasingly shaping decision making and strategy in Australian companies.
Be it running tender processes, managing critical supply relationships, mapping processes and supplier eco-systems, re-shaping the likes of logistics and supply lines, professional procurers are on the rise and in demand. A CPO (Chief Procurement Officer) is as likely to sit on your board in the next five years as your CFO and CTO.
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2019.