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Is indirect procurement following the path taken by the HR function?

Posted by Guy Strafford on Fri, Mar 30, 2012 @ 03:46 AM
  
  
  
  
  
Guy Strafford - Proxima

An excerpt from our upcoming whitepaper takes a comparative look at the HR business partner concept and the changing role of indirect procurement.

The HR business partner role first gained prominence back in 1996 when David Ulrich used it in his book, Human Resource Champions, the next agenda for adding value and delivering results. Ulrich described the new HR business partner model as an evolution. The HR business partner concept, at this time, had not been formally documented, but was already starting to be adopted by larger, more innovative multinationals that recognised significant duplication of activities and inefficiencies in the HR function.

The fundamental shift that Ulrich was proposing with the term HR business partner was that HR move from a mixture of a personnel work into a more strategic role. This led to a much better clarity and distinction between the tactical tasks of personnel administration and the strategic role that HR can play in supporting business units. 

The concept was that the HR business partner sits inside a business unit and is intimately involved in, and has a close understanding of, business direction and business objectives and looks to ensure that the business unit’s human capital resources are aligned to those objectives so that the business unit can deliver to plan. For example, after a merger or acquisition, the HR business partner will have a key role in following the integration, checking that pay scale and grades are compatible, developing performance management processes, supporting culture assimilation and so on.

  • Do you think indirect procurement is heading in this direction?
  • Is this a good or bad thing?

Enhancing & redefining the role of indirect procurement - research findings and results (whitepaper series)

Our upcoming whitepaper is the third in a series of three, download either of the below whitepapers to be notified when the final whitepaper is published (alternatively request a copy by contacting us here).
Why businesses struggle with indirect procurement

Part 1: Current Perceptions of the Indirect Procurement Function

 Why businesses struggle with indirect procurement

Part 2: Why do businesses struggle with effectively managing indirect procurement?
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Comments

Yes, except that it may not be called Procurement or Purchasing or anything much related to Buying. It will be a commercial role inside the 'client' function; necessitated by its having to compete with external providers to supply services to its own organisation. Management of these relationships will be at the core of its function. Why would it want Purchasing to do that? It is the next phase on from Category Management and it is the beginning of the decline of Indirect Procurement as currently known.
Posted @ Friday, March 30, 2012 5:21 AM by Bill Young
Many effective centralized procurement organisations have long recognized the 'customer'-facing role. With the exception of very large businesses, the job is normally combined with other responsibilities (e.g. contract roll-out/delivery within business units, where central category managers deal with primarily with category strategy and sourcing). This role existed in procurement (and in IT) well before 1996. So I would suggest HR have followed other functions. The big difference, as I see it, is that HR have turned 'Business Partner' into a full-time role (unnecessarily in many cases?) - not a progression that I would hope to see in procurement.  
 
Posted @ Wednesday, April 04, 2012 10:00 AM by Tony Colwell
Yes, and it will be what should have continued on from the early 80's, and it should be called Organizational Development.
Posted @ Wednesday, April 04, 2012 11:04 AM by Debra Rowe
Hopefully, corporate america will begin to focus on Indirect procurement as closely as they focus on HR and even direct procurement. There is a lot of wasted dollars (that any strong Supply Chain Department could capture) and basically the current departmental budget system being utilized does not put a great deal of emphasis on supplier selection, quality or even bidding one supplier product versus another. Moving forward, strong corporations will require their Supply Chain Department's to scrutinize indirect spend as closely as direct spend (or as your article compares to the HR budget). And there will be a realignment of more controlled internal work procedures and processes (put in place) and methods of procurement established in the spending in this area. Let's face it, this is the other 1/3 of any corporation's expenditure.
Posted @ Thursday, April 05, 2012 3:40 AM by Dessa Torrens
Organizational Development has a key role in this arena already...
Posted @ Thursday, April 05, 2012 3:41 AM by Debra Rowe
I can see a world where all of the administrative burden that procurement professionals face, such as tender management, data analysis, etc., is handled by a combination of technology (above and beyond what is availabble today) and a shared services / outsource approach. This frees up the procurement professional to spend their valuable time on relationship management, changing behaviours and thinking long term.  
 
 
 
I like Bill Young's thinking that its changing the nature of procurement - and that it is becoming increasingly a commercial role. The implications of this are great - such as tomorrow's procurement professionals are going to need very different skill sets than today's have. We should be building for this future now.
Posted @ Thursday, April 12, 2012 11:43 AM by Tom lawrence
Being one of the first new hires for a Procurement Shared Services Center with a Fortune 500 Company, we have found growth in symmetry and partnerships. Our audit ratings are 97% and include substantial cost savings. The team building and trusting relationships with our line organizations at the business unit level is continuing to grow through customer relations and value add. We are employees in this organization and have a vested interest in seeing its success.
Posted @ Monday, April 16, 2012 5:50 AM by Angela Winegar
Agree with Dessa as long as no one makes the case that Procurement should be part of HR.
Posted @ Monday, April 16, 2012 5:50 AM by Holger Baeuerle
HR, Legal and Marketing have largely been run away train wrecks for lack of spend control, while doing a credible job outside that ... once in a while a savvy CEO or Plant Manager will engage Procurement to support those functions, and always with great results.
Posted @ Monday, April 16, 2012 5:51 AM by Debra Rowe
The concept seems encouraging, but wouldn’t the inefficiencies of a decentralized procurement come into play.  
 
Assuming a Procurement Business Partner is made to collocate within the BU, the immediate benefit would be better understanding of the need of Business Unit. However, the challenge of Too little or Too Much work leading to partial or over utilization can plague and negate the potential benefits. Savings, definitely great in the initial couple of years based on spend power of that BU … but the question comes what post that, go back and consolidate?  
 
The scenario definitely needs to be put in a perspective and a fine balance struck between parallel chains of thoughts of bringing more support to BU but retaining the central vision. Ideal road would be something in the middle with right balance of stake holder involvement in the vendor selection process and inefficiencies cropping in owing to individual BU’s being given absolute open space for sourcing their requirements.  
 
Posted @ Thursday, April 19, 2012 4:31 PM by Kalpesh
I believe the low dollar transactional aspects of indirect procurement is going the direction of HR. But I think there are higher value added aspects that will continue to remain within the strategic sourcing organizations - partially because of the need to maintain customer relationships and the every changing opportunities to source more effectively.
Posted @ Wednesday, April 25, 2012 3:57 AM by Annalisa Ugolini
The higher / lower value aspects can be identified through a Make or Buy analysis - which needs to be updated regularly as spend categories and sourcing priorities evolve over time!
Posted @ Thursday, April 26, 2012 9:53 AM by Tony Bocock
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