Make Procurement Strategic 

To build-or-buy—that is the question

In many organisations, the build-or-buy question is not asked enough by departmental leaders and senior officers, defaulting instead to internal resourcing of projects whenever possible.  If you take agile organisational design to its logical conclusion, it is about resourcing just-in-time to meet new corporate demands to best serve customer demands.

Today, the procurement function should be one of the most strategic, arguably surpassing Marketing and Human Resources in the pecking order around the boardroom table.  Yet, in most organisations, procurement innovation is poor–not through any lack of capability, but because boardroom attitudes surrounding procurement lag well behind the curve to adapt ever faster to market conditions and innovation potential.

Turning to the procurement department to find a product, service or solution department is sometimes considered a last resort when it should be the first option.  One of the reasons for this reluctance stems from internal political conflicts between departments and the empire-building aspirations of leaders, where a higher headcount infers more authority and more power.

When organisations adopt these behavioural norms, the build-or-buy question is only asked when it has to be.  But does that matter?  And if it does, how can that mindset be changed?

Organisations of the digital era are battling for communities

One of those communities is suppliers. In a just-in-time resourcing paradigm, suppliers contribute best-fit assets and resources to the right quality standard and price at the right time.

The function responsible for managing the supply chain community and ensuring value is delivered efficiently to, for, and from them, is no less important than that of managing customer value.

For procurement to evolve, two things must happen.  Chief Procurement Officers must:

  1. Rewire the thinking of the boardroom to see procurement as a strategic enabler towards competitive advantage through business agility and operating cost optimisation.

2. Source fit-for-purpose methods and tools to operate an agile just-in-time resourcing ecosystem.

The growing strategic role of Procurement

Suppose your ambition is to supply the best-value resources at the right time. In that case, your enterprise must rely on many valued suppliers, operating in a closely coupled supply chain and marketplace.

Procurement is almost always underrated for its strategic worth as business disciplines go.

From a thousand feet, procurement can come across as purely administrative and contractual functions, often accused of slowing down the pace of resourcing and using contracts to overcomplicate matters. If that’s how procurement works in your business, it’s not functioning as effectively as it should.

Procurement has four big jobs to do that no other function can do better:

  1. It needs to educate the rest of the enterprise to appreciate the possibilities of sourcing that are available to it. Whenever the build-or-buy decision is made across the enterprise, someone must know what options exist on the supply side. Increasingly, suppliers are prepared to explore co-ideation, co-development and co-sourcing to help businesses find the best answer to the build-or-buy question.
  2. It needs to understand markets, build relationships and build capacity that will equip it to identify the products and services an enterprise needs precisely when they are needed. The start-point for this activity is to build a supply chain of useful and diverse suppliers.
  3. It also must seek the best value for the products and services purchased. That doesn’t mean the cheapest. Best value is about getting value for money by optimising spend against the level of rewards.
  4. Finally, it needs to manage risk. In procurement, threats come in many flavours, from continuity of supply and quality, price fluctuations, reputational risk of working with the wrong type of supplier, inherited risk from suppliers that are financially unstable or themselves have weak or compromised supply chains, risk of non-compliance, data loss, loss of intellectual property, shortfalls in insurance cover and a lot more besides.

To create an agile organisation, you will need a high-performing Procurement team operating with the right open mindset and an informed approach to fostering a community of capable suppliers. Otherwise, building a reliable just-in-time supply chain becomes challenging, and you may end up inheriting more commercial risks than desired.

In some respects, Procurement has earned its stripe as a non-strategic function

Part of the reason why Procurement is not seen as strategic comes from the fact it has acted in a reactionary role for decades.  Ordinarily, Procurement doesn’t get involved in resourcing until some other department makes a request.  This ‘end-of-the-line’ role has created a habit in senior executive teams to only ask for help from Procurement when it’s absolutely necessary.

To gain recognition as a strategic function, Procurement leaders must involve themselves in the next and new challenges facing the organisation, not sit on their hands and wait until someone asks. This is easier said than done.  The obvious problem happens when executives fail to invite procurement to the table on strategy, ideation and co-creation discussions because—‘Why would they be interested?”

To overcome this, Procurement leaders must put their hands up at the appropriate time and educate their counterparts on the opportunity of Just-In-Time Resourcing.  They must also take the time to spell out the consequences of doing nothing.

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Leveraging external inputs for success

In today’s business landscape, operating in isolation is not a viable approach to success. Delivering customer value has become a collaborative effort, akin to a team sport.

Regardless of an enterprise’s internal resources, they will only ever be a contribution to those resources of people, processes, data, and technology sourced from beyond the enterprise’s firewall. Many of these will come from industry partners and suppliers.

Any attempt to internally resource all the physical assets, data, people resources, ideas, etc. needed to operate an enterprise and produce customer value can only lead to less adaptability and flexibility. Embracing external partnerships and suppliers enhances the ability of any enterprise to adapt to market dynamics and customer demands more effectively.

From co-supply to co-ideation

The psychology of executive teams today remains focused on retaining intellectual property and skills within the enterprise, eyeing external sourcing—and its ability to govern intellectual property—with mistrust.

The internet has enabled the development of collaborative supply chains, but the shift towards relying on external resources for tasks that were traditionally handled internally has been a gradual process. Forward-thinking organisations aiming to become more agile understand that they can offload more of their project delivery responsibilities by involving trusted suppliers from an earlier stage.

To become a strategic function, procurement must manage the transition from:

  • Co-source—i.e., the supply of products and services from within and outside a business to achieve the same outcome.
  • Co-creation—i.e., a collaborative initiative between companies and their customers enabling the joint design of products and services. These initiatives might include the creation of goods, services and experiences, amplifying the process via the inclusion of client intellectual capital. Co-Creation is more informative than traditional techniques for identifying what products to bring to market, yielding deeper insights.
  • Co-ideation—i.e., a collaboration where companies and suppliers pool resources to share innovation risk and work in partnership to find solutions to market and customer challenges/opportunities. These initiatives can result in new products, services, processes, etc.

To establish a close and collaborative relationship with suppliers, where they are granted access to sensitive information such as intellectual property, hard-to-acquire customer, market insights, and more—there must be trust and a high level of confidence in suppliers to contribute value, along with mature legal, transactional, and contractual frameworks to ensure the protection of shared information and the proper handling of collaborative efforts.

Collaborative supply chains are a win: win for buyers and sellers 

Many suppliers these days are willing to bear much of the innovation costs on behalf of a procuring party, provided there is a potential commercial benefit or endgame that aligns with their interests.  In an era when it’s become harder to win new customers, a strong argument exists to sweat existing customer relationships for all they are worth.  One of the ways suppliers can do this is to offer to co-create or co-ideate new innovations.

Many suppliers are happy to invest resources early in customer projects to work collegiately to innovate new ideas, develop prototypes, and bring new products and services to market that have come from the drawing board, in anticipation of a ‘jam tomorrow’ and an opportunity to share the rewards of any intellectual property originating from the innovation.

Furthermore, the talent supplied by vendors—specifically to fulfil the project— is more likely to bring specialised knowledge and experience to the table.   Their dedicated focus on the same domain allows them to accelerate their pace of learning.  From this platform, they can contribute more effectively to projects.  This, is an alternative to stretching further already overloaded internal resources.


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An on-demand technology ecosystem 

It’s not good enough (or cost-effective) for modern businesses to seek to innovate products or services in isolation, when more nimble rivals are being more creative in their resourcing approach. Whether developing new software or designing services, a wide range of operational dividends come to firms that work collegiately with suppliers to originate solutions to problems together from the outset.

In an agile organisation, a community of accessible and approved suppliers must exist before an enterprise considers changing how it operates, delivers its customer value or frames a new requirement.

This just-in-time supply chain ecosystem can be delivered through different types of technology platform.  Here are two examples.

(1) In modern Enterprise Vendor Management Systems (VMS), just-in-time supply chain capabilities can come built in.

Most businesses are using a substantial external workforce of contingent hires to provision their talent on demand.  When they do, it’s likely they will look to procure a Vendor Management System (VMS) to manage the life cycle of recruitment, payment, compliance and reporting needed to reliably consume this community of talent. 

The latest generation of Cloud-Native VMS technologies, exampled by platforms like SimplifyVMS, come supplied with integrated Statement of Work capabilities that integrate fully with all other modules of the VMS system out-of-the-box.

(2) Stand-alone, instantly deployable just-in-time supply chain and contracting systems are also available today and can be deployed in a matter of hours thanks to Cloud-Native technology platforms.

Not every business needs a complete Vendor Management System (VMS) to manage its supplier base.  On these occasions, a dedicated solution is likely to be sought.  As an example, offers an AI-powered supply-chain contracting ecosystem to enable businesses to establish a community of suppliers with pre-agreed terms and conditions of supply.  Installing this kind of highly configurable off-the-peg technology means much of the hard work of establishing contract templates and processing rules are taken care of for you by the system.

Provision is made in systems like Contora for co-ideating ideas and producing outcomes against the Statement of Work personalised for each supplier. A contracting framework for any project can be published in hours, while downstream contingencies are pre-agreed and documented in anticipation of project overruns, etc.

Factors such as data and intellectual property breach risk, specifically in data security, data privacy and accepted cultural operating protocols, can derail third-party resourcing when not framed in contractual terms.  Systems like Contora build these issues into a robust contract framework.

Another major step forward in just-in-time supply chain comes from the melding of contracting to payment processing. Systems like Contora streamline work-done approvals, offer instant invoice reconciliation, automate payment processing to improve cash use, and negate the need for an accounts payable function.

Pro-active Law is another innovation that has come into this evolution of supply-chain management. With Pro-active Law, efforts are made to simplify contractual terms by thinking and planning ahead.  All this to avoid the consequences of ‘things going wrong’ before they happen. One way this is achieved is by spelling out the most important clauses in simpler terms in a format that parties can understand and act on in advance.


In short, just-in-time supply chain ecosystems present new opportunities for procurement to become ever more useful and strategic in the business-as-usual operations of an agile organisation.

A worked example:

In 2009, I met with the government quango in the UK responsible for organising the London 2012 Olympics.  The organisation was responsible for millions of pounds of expenditure.  Everything related to the event, from the tarmac for new stadia to tickets, actors and refreshment booths needed to be purchased.  You can imagine how many people were working in that building on legal contracts and procurement! And, as is typical in government contracts, the paperwork was monstrous. At the time, every corner of the office was flooded with printers tirelessly generating contracts.

Fast forward to the present, and the availability of digital ecosystems and markets has revolutionised the procurement landscape, offering the potential to fulfil tasks much faster, and at a fraction of the cost.  New tools like crowdfunding, knowledge markets, fintech banks, etc. provide options that didn’t exist back then.  Even simple technology advancements like digital signatures and video calls take the effort out of activities that used to take hours, if not days, to complete.

There has never been a greater opportunity for procurement to enter the digital age by leveraging just-in-time supply chains to fulfil projects at a fraction of the time and cost of yesteryear.  But this will not happen just because the relationships, methods and tools exist. There must be an attitudinal and behavioural mindset change.  So, how do you make this happen?

The mindset change agenda

As with all mindset changes that must take place in organisations, change begins at the top—and it won’t happen automatically.

The pandemic exposed the divide between organisations that were agile, like the Formula 1 technology manufacturers that were able to swiftly start designing and manufacturing healthcare machinery to support the new needs exposed by the pandemic—and those that were not—like many of the high-street food companies that wallowed in self-pity rather than adapting their business models.

To trigger this essential shift in mindset, a few catalysts could come into play. It might be an inspirational leader or a fantastic case story that persuades other firms they should follow suit.  It might also be a report by a reputable management consulting firm or market research agency that says the writing is on the walls for those companies that don’t adapt their procurement practices.  All possible, but unlikely.

It’s most likely, change will come from creative procurement leaders and teams that see potential in their supply-chain and can persuade leaders there is a better answer to the ‘build-or-buy’ question.

Proving this point will probably come down to establishing a pilot project at the right time once trusted suppliers are in place—where co-creation and co-ideation become a potential option.

This is all the simpler when those suppliers offer to co-create.  And many technology companies are moving in this direction.  Firms like Fujitsu and Wipro are offering co-creation services to their larger clients.  In the metaverse industry, co-creation has almost become the norm.  It’s often not economically viable for organisations to consider bleeding-edge innovation without close partnerships with suppliers.  And today’s bleeding edge will one day become the run-of-the-mill state-of-the-art.

Nevertheless, achieving project success with one pilot is only a step along the road.  What must happen next—to persuade leaders to change their ways and adopt a new behaviour—is to expose that evidence of success.

I call this ‘the mirror.’  It’s a direct assault on the senses that shines a light on ageing assumptions and sub-optimal practices, offering an alternative perspective on good things that are happening in the enterprise, exampled by a successful pilot.  Ultimately, it comes down to having intelligent senior officers recognise for themselves there is a better way, and that latent habits and norms of behaviour aren’t as effective as they can be.


Closing thoughts

Setting aside the time and goodwill to bring senior officers together and persuade them to re-think their build-or-buy approach is where working with a third-party consulting partner experienced in affecting behavioural change can really help.

Procurement leaders must shine a light on alternative ways to address the build-or-buy question and persuade colleagues there is a better way to move forward than simply assuming internal resourcing is better.

Only once this mindset shift takes hold can procurement leaders hope to truly elevate their role in driving the procurement function towards greater effectiveness and value.

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