Complexity is a blessing for Purchasing

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Complexity is a blessing for Purchasing

Complexity is a blessing for Purchasing

Complexity is a blessing for Purchasing

by Hervé Legenvre, PhD EIPM

 

 Last December, the EIPM annual conference was held on the theme of Complexity. One of the key lessons we captured from the two days of intense exchanges is that Complexity is often seen as a curse, but it is also a blessing for Purchasing Professionals, let’s look at why.

Complexity is the combination of two factors: The multiplication of business relationships and uncertainty

A major source of complexity comes from the diversity of relationships you need to handle and on the dependencies it creates.

·       Multiplicity of countries, systems, reporting and regulations as well as legislations

·       Number of legal entities and the continuous process of mergers and acquisitions

·       Diversity of customer’s and stakeholder’s needs, sustainability concerns

·       Numbers of layers in the value chain and supplier dependencies

This is exacerbated by a second source of complexity coming from the uncertainty often associated with change and transformation outside, as well as inside the company

·       Volatility of price, currencies

·       Evolution of the tax landscape and regulations

·       Innovation and new business models within and across industries

·       Changing customer demands often towards personalisation

·       Transformation of companies & sudden external changes

So clearly Purchasing is at the forefront of complexity in the current Business world. We should see this as a blessing and an opportunity. This creates Top Management level and Board Level attention for Purchasing.

I was recently interviewing the former CPO of a top engineering company, he said that it was CSR (Corporate Social Responsibility) risks that provoked invitations to Board meetings, and it was an opportunity to show how Purchasing was helping to protect the business value. I also regularly exchange with a CPO who informed me that when you buy raw material that can break or make the financial performance of the Business, you attract attention from top Executives and this provides an opportunity to show your worth. The following picture illustrates this.

 Complexity is a blessing for Purchasing

What lessons can we take from this? First, we need to focus on communicating towards Executives on the few critical risks and strategic projects that really matter. Second, we need to act as an early awareness system that flags opportunities and risks coming from the market. This can be targeted towards a few key people, but it can also be turned into a broader communication on an intranet that positions Purchasing as a source of Business Intelligence.

 

Hervé Legenvre, PhD

EIPM Value Creation Observatory Director