Why Procurement Is the Hub in the Wheel of Business

“Procurement can be well-positioned to cross-pollinate ideas and perspectives to various departments and roles in the organization to create value. Typically, among departments that don’t interact directly.” – Larry Leung, Procurement Specialist (LCBO) & Regional Chapter Leader (Procurement Foundry)

When Proctopus Founder Dave Jones asked a question on LinkedIn regarding how we as procurement professionals can “best position ourselves to remain relevant,” two things stood out.

What was Jones’ motivation for asking the question in the first place? Apparently, a law society predicting a “savage reduction in lawyers as we get towards 2050 through AI” was the initial reason.

Since we have many friends in the legal profession, we will refrain from telling the lawyers at the bottom of the ocean joke. However, the underlying message here is that we are moving towards a building for how the world should work versus improving the way it does work.

Within this context, we will address the future of the procurement professional in this brave new world.

Hub in the Wheel of Business

While Larry Leung’s comment that procurement is “well-positioned to cross-pollinate ideas and perspectives to various departments and roles in the organization to create value” is not new, the timing of his response is on the mark.

In other words, like the hub in a wheel, we all know how procurement and the supply chain support the many spokes of a diverse enterprise. The difference now—especially in a post-pandemic world, is that everyone knows it.

Considering Larry’s comment beyond recognizing the reach and the subsequent importance of procurement, we now need to take a step back and ask how. 

From a practical standpoint, what does being well-positioned to “cross-pollinate ideas and perspectives” mean? More importantly, do we have the experience and expertise in these areas to fully understand our extended impact? Remember, we are looking at understanding what we do and how we influence outcomes for the stakeholders within the enterprise and external stakeholders, including suppliers and ultimately end customers.

Lumbering Along

Let’s test the cross-pollination of ideas and perspectives in the complexity of a real-world challenge—and yes, dear procurement pro, we will be seeking your input on this one.

Over 12 months, the price of lumber increased by 400%. According to a May 27^th, 2021, Supply Chain Dive article, even though the “labor part of the sawmill problem” will be resolved by the end of the year, economists expect “prices to remain high into 2022.”

The impact of the astronomical increase in lumber prices and the resulting shortages in supply are far-reaching. For example, multiple sources report that the limited supply of lumber has increased the costs of building new homes by $30,000. But, as you sit back on your comfy chair, also consider the fact that furniture manufacturers in the U.S. use more than 24 percent ^[1] of all hardwood lumber in that country. This percentage would explain why a sofa that usually costs $600 is now selling for around $2,500.

Alright, intrepid procurement pro, what ideas and perspectives can you bring to the lumber issue to create value? What role can you play or should you play in addressing the problem today and in the longer term.

Seeing Beyond the Trees

The lumber shortage is one example of the challenges enterprises will face (and need to respond to) in 2021 and beyond.

Supply chain intelligence firm BSI reports that regulatory changes and food supply chain vulnerabilities will be some of the key issues to watch as the year unfolds.

Taking a cue from Larry, procurement now must do more than watch.

[1] The Effect of Changes in Lumber and Furniture Prices on Wood Furniture Manufacturers’ Lumber Usage, William G. Luppold, United States Department of Agriculture.