What Do Albert Einstein and the New Purpose of Procurement Have in Common?

Albert Einstein once coined the phrase:

"The definition of insanity is: doing the same thing over and over again and expecting different outcomes."

But what does that actually have to do with Procurement? We interviewed three leading Procurement experts from different industries to better understand the new Purpose of Procurement and answer this question. 

THE WHY: The REASONING for change

We are at a point where consumers take more conscious decisions. Growing concerns have resulted in regulations around CO2 and supply chains, entire countries and companies have signed up for net-zero scenarios, and investors challenge businesses to focus on long-term, sustainable ambitions. Lastly, a new generation of professionals' expectations of the companies they work for has created an unprecedented and powerful force for change. Many players and industries have understood the urgency to transform and benefit from the upside by creating a positive environmental and social impact.  

In fact, there have been some 30 crises that have disrupted supply chains in the last 20 years, from natural disasters such as earthquakes to trade conflicts up to pandemics. In addition, young talents do not perceive Procurement as THE place to forge their career, resulting in a shortage of young talent. And last but not least, Procurement misses the opportunity to act as the golden compass to drive Sustainability.

Despite the challenges mentioned above, a handful of patterns keep repeating themselves, and Procurement continues to work as it has for decades. Most decisions are made primarily or exclusively based on price and maximizing short-term savings. So: Procurement needs to get its act together and look for ways to transform the entire ecosystem into a more sustainable and responsible world in order to fulfill its new Purpose. As Marielle Beyer (Head of Global Procurement at Roche) puts it:

“We have always had a Purpose and value proposition in Procurement, but we probably have spent too much time internally focussed as a discipline. Today, we see ourselves as a business enabler, and are positioning Procurement at Roche in the context of the Roche Purpose statement, supporting our customers to ‘doing now what patients need next’.”

THE WHAT: The DIMENSIONS for change

Doing nothing is not an option - now is the time to put Procurement on the map and prove how to add value beyond generating savings and avoiding costs. The approaching stakeholder economy forces companies to be accountable not only to their investors but also to their customers, employees, suppliers, and society at large.

Based on our conversations with leading Procurement experts, we consider Sustainability, long-term Value Creation among partners, and building Resilience to be decisive for the Procurement function to define its Purpose. By incorporating these accelerating value streams into business strategies, Procurement can benefit the supply chain by increasing transparency and supporting sustainable and ethical sourcing strategies. Anna Spinelli (CPO at Deutsche Post DHL Group) explains:

“Concerning Sustainability there is a sense of urgency. The expected actions and behaviours need to be part of your company’s strategy, which means where you put focus needs to be meaningful and fit to the companies Purpose, in our case 'connecting people improving lives'. Communication is therefore absolutely key and setting meaningful targets can also create focus on the critical topics.”

THE HOW: The ENABLERS for change

To future-proof and enable the new Purpose of Procurement in the best possible way, organizations need to identify, hire, and train talent, adopt new ways of working, establish new leadership approaches, adapt new collaboration models, and ultimately create new digitally connected ecosystems. However, it is not enough to excel at one of these enablers as they are interdependent.

To create long-term value for the organization, Procurement must achieve sustainable and continuous improvements within all enablers. Outstanding performance in one cannot outweigh inadequate performance in another. According to the interviewed experts, Procurement needs to master these skills to establish sustainable, resilient, and value-creating practices. Neil Marsons (Director of Global Purchasing at Jaguar Land Rover) states:

“Digital Procurement is a ‘key enabler’ not only from an efficiency perspective but also regarding effectiveness, i.e., the sheer range of data using RPA, AI, and analytics. It enables us to create the future better as opposed to predict it. And the best way to predict the future is to create it.”

To not do the same thing over and over again, the newly founded Procurement Initiative aims at creating a movement to understand the Why, What, and How for change. Based on our observations, corporate executives should recognize that the changes underpinning the new Purpose of Procurement are more pivotal in nature. Or, as Sir David Attenborough (at the G7 Summit 2021) reminds us:

"The decisions we make this decade […] are the most important in human history."