Then and Now: What Has Procurement Accomplished in the Past 25 Years?
Procurement has changed dramatically in the past 25 years, but it is not often that we take a step back to evaluate just how much has changed. A flashback to 1996 would reveal the average procurement professional sitting at a desk stacked high with paper and a bulky, dial-up desktop computer to help with some select tasks. This is in stark contrast to today’s world, where real-time insights are at your fingertips thanks to the digitalization of procurement and the dawn of business networks.
I have worked in the procurement world for a long time and recently rejoined SAP as the chief marketing and solutions officer for our Intelligent Spend and Business Network business. So much is drastically different today compared to 25 years ago, but the biggest difference is speed. Think about it: In 1996, procurement was a mostly manual process. Just to issue and analyze a request for proposals could take a month or longer between in-person meetings, faxes and sending everything via postal service, not to mention the manual analysis of all that information. Today, this can be accomplished in a week – sometimes in just a day!
With SAP celebrating the 25-year anniversary of the founding of Ariba, let’s look at how far we have come as an industry in the past two and a half decades. To gather insight, we asked industry colleagues for their thoughts on the biggest changes over time.
Technology: What is the most significant technology development to affect procurement operations in the last 25 years?
Ninian Wilson, Group Procurement Director and CEO, Vodafone Procurement: “The emergence of digital procurement (called e-Procurement back in the day) started the journey towards digitization of the end-to-end procurement process.”
Len DeCandia, Chief Procurement Officer, Johnson & Johnson: “The move from heavy ERP systems to cloud-based technologies and systems has made a dramatic change, allowing us to be more agile and adapt to change more quickly. It has also given us a level of transparency across our total business that we’ve never had before, uncovering insights and opportunities that are helping propel the function and our business forward.”
Marcell Vollmer, Partner and Director, Boston Consulting Group (BCG): “Business networks are a great disruptive technology automating supplier collaboration and purchasing processes.”
Bob Murphy, Chief Procurement Officer, IBM: “There are a lot of important technologies that have affected procurement – automation, analytics, AI, blockchain, to name a few – but the technology that has had the most significant impact is how we leverage data. Without access to data and the ability to cleanse it, enrich it and use it, we wouldn’t have as much success with analytics and AI and other technologies. Data has been the foundation for progress for decades, and the importance of leveraging data has grown exponentially in recent years. Data will continue to be one of our greatest assets.”
Dawn Tiura, President and CEO, Sourcing Industry Group (SIG): “The variety of processes that are now addressed is the greatest advancement we have seen in the last 25 years. From the early days when it was only e-procurement, to now when we can have complete contract lifecycle management, look for modern slavery in our supply chains and work to improve our ESG scores with technology. These items were never thought about 25 years ago.”
Gordon Donovan, APJ Intelligent Spend Evangelist, SAP: “Many of the things are the same, from reqs, to PO to authority, to sending to a supplier, goods received and shipping notices, invoices and three-way matching; however, the speed now compared to then is amazing. Technology that enables real-time communication over a business network speeds up and makes these transactions more effective, more efficient and increases cooperation.”
Harold (Hal) Good, President & CEO, Procurement Pros Group, LLC: “Changes in procurement have been driven by changes in technology. In this digital, data-rich global environment, procurement has access to the functionality and tools needed to be strategic, agile and yes, even opportunistic. It can communicate in real-time with the entire enterprise as well as a global supplier base. The intelligent use of data including the use of increasingly accurate predictive technology to manage supply chains and logistics is an added resource available to contribute to organizational goals and to control risk.”
Then and Now: What is the biggest difference between procurement in 1996 versus today?
Vollmer: “Procurement evolved into a much more strategic, value-generating function.”
DeCandia: “Procurement has gone from being a subset of the supply chain function to an enterprise-wide capability that helps manage innovation and the critical internal and external relationships that support innovation. We are much more involved in all aspects of the business and are spending more time developing deeper strategic relationships with suppliers. Those relationships bring us speed and scale that can make the difference between winning and losing in our dynamic environment.”
Tiura: “Strategic sourcing was a brand-new term in the 90s and it was the first time that company-side cross functional teams were formed to support a procurement initiative. If you typed the word ‘sourcing’ it would default to ‘souring’ in Word Perfect. It wasn’t even a recognized word back then. The other huge difference is the focus on third-party risk that didn’t exist in 1996. It has become apparent to most organizations that the procurement organization can ‘make or break’ a company from a risk perspective and we have a laser eye to watch out for and to mitigate risk events.”
Murphy: “The scope (and expectations) of procurement have increased significantly since the mid-90s. So much more is expected of sourcing teams today. We have gone from a manual, transactional and reactive way of working, to being automated, strategic and proactive. Digitalization over the past two decades has allowed us to gain visibility to spend, risk, client satisfaction, etc. And digitalization enables a full (and transparent) source-to-pay perspective. Procurement can be far more effective in our expanding mission, not just ‘at the table’ but a key contributor to the company’s performance.”
Good: “For many years, I began sessions I moderated at procurement conferences by asking the audience to raise their hand if they had always wanted to be a procurement professional. Very seldom did a hand go up. When asked, they typically described a circuitous career journey with ending up in procurement being an unintended consequence. Those days are over! Procurement professionals today choose a career in procurement or are recruited from another role because of relevant skills or experience.”
Wilson: “Fundamentally, back in 1996 we used to phone our suppliers and ask them what we spent with them – now we know!”
Donovan: “The broader focus on non-price considerations, such as risk, sustainability, quality, total lifetime cost and the supplier relationship is different. Our understanding of the things that we do that impact the supplier relationship is clearer. I think the other area is greater knowledge of the supply chain, and our role within it.”
ESG: How have companies’ procurement strategies evolved in the last 25 years to address environmental, social and governance (ESG) issues?
DeCandia: “Companies have recognized the opportunity to use their investment dollars in relationships that amplify and expand their influence in driving a world that is healthier and more equitable for all. We are seeing groups dedicated to pursuing supplier diversity and the rapid expansion of supplier sustainability programs across the market. Importantly, we see that ESG commitments now specifically call out the role that procurement plays in developing responsible business practices, and the contribution that procurement makes on behalf of the business.”
Vollmer: “ESG gets more and more into sourcing decisions. Procurement can deliver impact on sustainability as the supplier ecosystem contributes to all ESG goals. If companies want to create impact, procurement can deliver tangible results by defining the right suppliers.”
Murphy: “A company’s ESG program is no longer just ‘doing the right thing.’ A company’s reputation in this space is often evaluated before consumers make a decision to buy, and before other companies (and governments) will do business with them. ESG is becoming a competitive advantage.”
Wilson: “We now have ESG scoring in all our tenders and this can account for up to 20% of the overall weighting. The incorporation of the ESG weighting links directly to Vodafone’s purpose agenda.”
Tiura: “These were barely on the radar in 1996. We had supplier diversity, but most companies didn’t even monitor that, let alone ESG or DEI. It was the early 2000s that we started to look at carbon footprints, but all that work was thrown out in order to get savings when the stock market crashed and the recession became a reality in 2008.”
Donovan: “25 years ago, it was limited to ‘do you use recycled paper and have a toner recycling scheme?’ Now, ESG is integrated into supplier selection, and driving visibility into the supply chain. Two-thirds of the average company’s ESG footprint lies with suppliers and that’s a big evolution. Now that we understand the broader areas through work from the UN, among others, we can baseline and determine how far we want to go. This is the same as getting people to be more aware of cost, driving that cost consciousness through an organization and when we have changed their behavior, become less of the governor and more of the facilitator for people to make their own decisions. The same is happening now with ESG: procurement can lead and change organizational behavior until it becomes the norm.”
Inspiration: What advice would you give to young talent entering the field of procurement?
Murphy: “Have a growth mindset: never stop learning; be resilient, engaged and innovative. Procurement has gone from what was once viewed as a ‘pencil-pushing’ role to high-tech in a relatively short time. Procurement is now using automation, artificial intelligence and data analytics. But it’s the people that lead the way.”
DeCandia: “First, become a strong businessperson. This will provide the foundation for your decision making and ability to be a good partner. Then, experiment, learn and go deep on procurement sciences like category management and supplier relationship management. And be as digitally literate and curious as you can possibly be.”
Tiura: “Be curious, learn to ask why often and listen actively. You will source commodities and services you have never been exposed to. Learn everything you can about them. I remember crawling inside a power transformer to learn how it works and going into surgery to watch a hip and knee replacement. By doing these types of things, I gained the trust of the engineers.”
Donovan: “Get broader experience in as many industries across as many categories as you can. Take time to understand the stakeholders, as this gives you the most rounded view to know how to be successful in your goals.”
Vollmer: “Procurement is the best function in a company to get you a broad overview of the entire organization to understand the business model, learn how the company really works and where are potential areas of interest. There is no better place within a company than procurement.”
Wilson: “Embrace technology, experiment and learn so that you can help advance the profession.”
Cheers to 25 years!
We’ve learned a lot over the last quarter of a century, but one of the biggest takeaways is how critical procurement has become in the overall business landscape. We’ve earned our seat at the table, and we’re continuing to evolve and innovate as an industry. I can’t wait to see what the next 25 years has in store.
What are some of the biggest changes you’ve experienced in procurement? Engage with me on social – I’d love to hear your thoughts!