Even before the COVID-19 pandemic underscored the critical skills gap across the procurement and logistics landscape, a report by the American Productivity & Quality Center put a pin in the talent shortages facing today’s industry professionals.
APQC’s report, “Identifying and Developing the Future Skills Needed in Sourcing and Procurement,” features a survey of 204 professionals, and includes input from an expert focus group and one-on-one interviews with procurement professionals.
Many academics and practitioners refer to the subtle shifts that have taken place since the turn of the century as the “new economy.” Whatever it’s called, the shift is clear.
The report cites multiple factors driving today’s business environment, including:
Simply put, viewing procurement as a “back-office” function is not a good strategy (it never was) as the world adjusts to new economic, environmental, health and political realities. The good news is that companies are pushing procurement out of the back office and onto center stage, thus increasing demand for skilled procurement talent. The bad news? Today’s procurement professionals lack essential skills needed to succeed, according to the report. In addition, finding individuals with the right talent is getting increasingly harder.
Marisa Brown, APQC’s senior principal research lead for supply chain management and primary author of the report sums it up: “Procurement talent development is not adequate in developing the most important skills for the future.”
Why is a reset needed when it comes to considering the procurement skills needed for the future? The report suggests that new business realities including globalization, technological change, market volatility, and accelerating consumer demands are increasingly pushing procurement into the spotlight.
In addition, the lens through which organizations look at traditional ‘goods’ has changed. For example, sourcing for services has exploded, the report says. “A case in point is outsourcing logistics, wherein 86% of companies outsource warehousing and distribution to third-party logistics providers. In addition, more sophisticated sourcing business models — such as performance-based contracting and vested outsourcing models — have emerged as organizations seek to drive innovation and mitigate risk with supply chain partners.”
Skills for the Future of Procurement
One of the main goals of the APQC research was to identify the key skills for the future of procurement. They fall four categories; job-specific, general business, social and business ethics.
In terms of job-specific skills, or those technical skills specific to the procurement function, the survey indicates that the most important involve assessing and managing suppliers. This means using spend analytics and risk analysis skills to identify which suppliers are the best bets for building strategic partnerships.
General business skills, or those relevant in and beyond procurement, were rated as more important than job-specific skills. “We are no longer just looking to compare suppliers with basic RFPs,” noted David Handley, vice president of business partnerships, business initiatives and support services with Vancouver Coastal Health. “We need more general business skills that focus more on managing strategic supplier partnerships which collaboratively look for ways to drive out total cost of ownership. This means having much more broad-based business skills, ranging from financial acumen for developing business cases to working collaboratively with suppliers to reduce our risks.”
Social skills are considered the “soft” skills involved in collaboration and managing change. Out of the skills categories examined by APQC, this category was ranked as critical or very important. Harvard Business Review article authors David Frydlinger and Oliver Hart (the latter a recipient of the Nobel Prize in Economic Sciences for his work on contract theory), point to economic research proving that the soft skills of relational contracting can yield significant results for organizations. They argue that not getting those aspects right fosters ill will and unproductive “shading” behaviors that can drive up costs and inefficiencies.
Business ethics, also called “professional ethics,” involve the application of ethical principles in the business environment. It’s not surprising that this skill is at the top of the overall skill list, because unethical procurement practices — including bribery, illegal sourcing and bid rigging — can land organizations in huge trouble with customers, shareholders, the press, and regulatory authorities.
The report reveals that a big concern is not simply avoiding the negative aspects of ethical issues, but rather not recognizing the need for the positive role that procurement can play in driving ethical sourcing practices. It also uncovers large gaps in developing the most important procurement skills, highlighting that almost 60% say business ethics is critical or very important, but only a third are effective at helping employees develop this skill.
According to the authors, “Smart procurement organizations are applying strong business ethics as a way to enable their organizations to achieve corporate sustainability and social welfare goals.” They point to the example of Theo chocolate for its work in sustainable sourcing.
Other top skills that procurement professionals should embrace, as identified in the APQC report, include critical thinking, communication, stakeholder management, relationship building and management, and leadership.
The Way Forward
Brown asserts that the consequences of not addressing the skill gaps are huge. “If organizations cannot develop these skills in-house, they will be forced to secure them through external hires and/or consultants,” she says. “But the only other option is to simply not develop these skills — and that’s even more dangerous. Organizations may be able to rely on a handful of experienced procurement professionals for now. But when those people retire (and they will), the function will be in the hands of people who may lack the ability to lead, think critically, or act ethically, and who have never built relationships with key suppliers and internal stakeholders.”
The big picture view? “Develop talent — now.” Adds Brown: “Many procurement teams are already struggling to recruit well-qualified external talent, especially for senior-level positions. The market for top procurement talent is highly competitive, so organizations need to offer competitive packages to attract qualified candidates.”
APQC says organizations should invest in procurement talent management programs. Unfortunately, it found that more than half of organizations (56%) do not currently use their talent development program as a selling point to appeal to procurement professionals during recruitment. That’s a huge missed opportunity.
The APQC report warns that without the next generation of skilled professionals waiting in the wings, procurement’s time in the limelight “may be met with rotten tomatoes rather than roses.”
Expectations for procurement’s performance are high and growing higher. “Procurement leaders must act quickly to develop the next generation of procurement talent,” the report continues. “They should use all tools at their disposal, including certification programs and online trainings, but must also understand that a lot of this work must be done in-house.”
Kate Vitasek is a graduate and executive education faculty member at the University of Tennessee.
Read more of SupplyChainBrain's 2022 Supply Chain ESG Guide here.
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