Can procurement change the world?
That’s the question explored by Bonfire CEO Corry Flatt in a recent feature on Future of Sourcing.
It may sound farfetched to those outside of the procurement world. However, as Public Procurement Month comes to a close, there’s no better time to consider how procurement can be part of the solution to some of the biggest challenges facing the world.
Public procurement’s footprint
Still skeptical? Consider the following statistics:
- Global public procurement spend is estimated at $8.5 trillion USD annually
- 13 – 15% of gross domestic product (GDP) in OECD countries is spent through a procurement process
Contrast this with the World Economic Forum’s estimates for the expenditure required to tackle major global challenges:
- $116 billion to wipe out hunger,
- $26 billion to provide basic education to all children, and
- $8.5 billion to eradicate malaria.
Given the scale alone, it’s clear that public procurement, and its core principles of fairness, transparency, and best value, can have a major impact on the fabric of society. The ripple effect of responsible and ethical spending decisions extends beyond the direct end users, to the supplier community and wider society.
From increasing a community’s economic capacity through the involvement of minority-owned businesses, to promoting more sustainable industry by including environmental criteria in the purchasing decision, procurement teams can have a major impact on the world around them.
Challenges to overcome
However, there’s a clear gap between procurement’s potential impact and the status quo in most public organizations:
- Only 26% of public sector procurement leaders believe that their procurement function is highly effective, and that procurement is highly regarded internally and seen as a key business partner contributing significant strategic value
- Technology adoption is low, with only 39% of procurement leaders reporting that their digital strategy helps them deliver on objectives and improve enterprise value
The digital transformation that has brought exponential efficiency gains to many functions has been slow to materialize in procurement. In many cases, procurement is still seen as a back office function, with staff members’ time monopolized by administration and transactional work, leaving little time or energy for innovation and process improvement. After all, it’s hard to think about changing the world when you’re buried in paperwork.
How technology accelerates procurement’s impact
Adoption of technology is a key piece of the puzzle when it comes to procurement’s impact. As the pace of technological advancement accelerates, it is crucial for teams to begin the process of modernization in order to take advantage of game-changers such as blockchain and AI.
It begins with leaving behind paper and offline processes that are a drain on staff time and an obstacle to collaboration.
“By taking a first step toward digitizing the procurement process with something as simple as an e-sourcing platform, teams can eliminate many of those ailments while introducing collaboration, data insights, healthy competition among vendors, transparency and compliance,” notes Flatt. “The compounding effect of utilizing procurement software for smarter decision making has the ability to lead to material improvement and an overall better world for people.”
Once digitization is underway, the data that was previously scattered in spreadsheets and filing cabinets becomes centralized and actionable. This unlocks the potential to apply artificial intelligence and blockchain to procurement for greater impact.
Olinga Taeed of Birmingham City University, a leading researcher on the applications of blockchain for social good, is enthusiastic about the role of procurement in enabling values-driven purchasing. He writes:
“My honest belief is that procurement will be the single largest instrument in the world to change the world – children will say they want to be a procurement officer because they will want to change the values of the world – what we buy, what we eat, what we sell, the values by which we transact. Blockchain and AI will change our processes dramatically.”
What is your organization doing to build towards this future?
Read the full article in Future of Sourcing.