Value Proposition Procurement Model in New Hackett Research

-- Supply Chain Management Review, 12/19/2007 7:56:00 AM

A new report from The Hackett Group offers a five-stage plan for procurement managers to develop their operations from focusing on tactical sourcing to a more comprehensive value management approach.

The report, “Evolving the Value Proposition of Procurement — A Five-Stage Model,” starts by examining today’s battle to tighten the belt while weathering smaller supply markets, powerful suppliers, a volatile global supply market, and more demanding customers.

The report then tracks the path to evolution, describing the future of procurement and how to be a part of it. The report’s five stages are:

1. Assurance of Supply: Right goods and services at the right time. Procurement role = buyer/planner.
2. Price: Right stuff at the right price. Procurement role = negotiator.
3. TCO(Total Cost of Ownership): Procurement role = supply expert and project leader.
4. Demand Management: See and shape demand. Procurement role = money and relationship managers.
5. Value Management: Increase business value from spend, not just reduce spend magnitiude. Procurement role = Trusted business advisor and change agent.

“What we’ve detailed here are the steps in a journey that takes procurement organizations five to 10 years, at a minimum,” said Chris Sawchuk, procurement practice leader at Hackett. “But the benefits of moving up this evolutionary ladder are clear. They begin with broader and deeper spend impact. Then they enable procurement to move beyond cost savings and generate real competitive advantage for their company by harnessing the innovation and intelligence of supply markets.”

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