It was reported in November of last year that Pepsico had removed marketing procurement support from the business. This resulted in anxiety from the procurement community, in both marketing and non-marketing teams. If removing procurement support is successful (and we could debate what “success” could look like), then does this imply that the procurement function is no longer required?

The ADR Europe team recently supported a procurement effectiveness review for a public sector organization that disbanded their procurement function some years ago. In this environment, business stakeholders were specifying the need, designing solutions, engaging suppliers and contract managing. The outcomes were impressive: lean operations, rapid response to changing customer requirements and careful budget management. This would support the argument that a procurement function is not compulsory to achieve value through supplier management.

If your organisation is considering removing procurement support from one or all spend categories, I would recommend checking 3 things first:

1. Know what Procurement can and does contribute

If you are trying to figure out if your procurement team is adding value, you need to know what that value is and how to measure it. Start with the big picture – is your procurement team contributing is to your organisation’s financial performance in terms of revenue growth, operating cost reduction and capital efficiency?  Most importantly, are business stakeholders and suppliers satisfied with the value offered to them by the Procurement team?

Then consider a category-by-category review. Maybe some categories have already had the benefit of rigorous procurement effort, where application of the strategy has driven the price down through competition and then reduced total cost through collaborative efforts. Now what remains is supplier management for incremental performance improvement and innovation. Who is best placed in your organisation to do this, operational contract managers or procurement professionals? If you still have less mature categories that are still on a journey to full value realization, it may make sense to retain dedicated procurement expertise.

2. Discover if the capability of your people matches the business challenge

Some buyers are perfect for volatile market conditions, some buyers are brilliant facing entrenched monopolies. Great buyers can learn and apply skills quickly, depending on the situation. But they can only do this if they know what skills are required in that situation so managers should check if this is the case. When planning skills assessment, managers need to think 3-dimensionally to ensure that they are measuring competencies against what is really required for the category right now, not just gaps against generic job profiles. This is just as relevant in organizations where procurement is devolved. Even if supplier management is only a small part of the job, business professional needs to understand techniques to optimize that element of their work. Networking with colleagues, observation and discussing lessons learned with peers are all valuable “on the job” learning activities, but they do require advice and direction to make the most of the experiences.

3. Consider whether you have the right supplier management infrastructure

Even if you have no requirements for “buying” (perhaps because of an existing catalogue or long term contract arrangement), there always exists the need for expert supplier management. Supplier management activities include performance management; handling end customer expectation and extracting more value from your ongoing spend with suppliers. These tasks often already lie with functional stakeholders who are either unaware of the full depth of responsibility or unable to accommodate it alongside their other work. Whoever performs supplier management, the correct enablers must be in place such as analytics that support decision making and contracts that address supplier performance management.  If professionals are supported to understand and use these tools, any function can successfully deploy them.

There should be no rush to carve marketing procurement away from the main procurement team, or to question the purpose of procurement as a function.  However, procurement should not hide away from the need to identify and deliver benefits through ongoing supplier management. If organizations can survive and thrive without centralized procurement, the urgency of providing measurable value is now more relevant than ever.