The thorniest problem with outsourcing is not the exaggerated promises and underwhelming returns, but the typical customer's shocking disregard for prudent oversight and management control.
Institute of Management
Those organisations that successfully create an integrated culture of value demand management will have had to overhaul behavioural relationships radically. Not only inside the company and those governing the interface with key supply markets, but also those pertaining in the supply market itself.
Internally, the role of procurement as a transactional function and a reactive service provider will change to that of a proactive partner in the management of the total value chain, from upstream investment appraisal to the point of delivery. At the same time, the concept of the internal customer will be largely discarded. Even the business unit / profit centre approach may give way to an alignment of business goals and focused corporate direction, recognising that this is the foundation for extracting optimum business value.
Traditional procurement skills will be seen as inadequate for driving forward cultural change. A new breed of supply market specialist will emerge, with the technical ability to operate authoritatively in those business areas traditionally regarded as the domain of finance, sales, and engineering. Relationship management skills must be developed to persuade both peer groups and the Board of the merit of value demand management, and to deliver convincing evidence that the new integrated approach to the acquisition process is a sound business proposition.
Externally, traditional adversarial relationships with the primary supply markets will give way largely to long term trading arrangements that, particularly in the areas of partnering and alliancing, place a heavy emphasis on behavioural alignment and the pursuit of common goals and objectives.
It is unlikely that such alignment will be achieved quickly. The journey from adversary to partner will require a large degree of trust and developing openness on both sides. On the way it will need assessment of each other's cultural compatibility, joint benchmarking of performance, the use of a scorecard to monitor behavioural progression and exposure of joint business plans where the interdependency is significant.
In the future, the role of procurement will develop from pure negotiation to facilitation and relationship management. Terms of trading will be developed and applied that reflect joint objectives and an equitable balance of risk and reward, rather than those that promulgate a culture of distrust and blame. Procurement will also take responsibility for ensuring that the total acquisition process operates effectively throughout the business relationship, including the performance and well being of secondary and subsidiary layers of the value chain.
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