How Should Organizations Manage the Decentralization of Procurement?

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What is the best way for an organization to acquire goods and services? Should it be centralized into a functionally-specialized procurement function? Or should authority be pushed down into the organization so that line managers control purchasing? What would a hybrid approach to sourcing look like?

The answer to these questions is increasingly moot. Line managers are inserting themselves into sourcing and procurement decisions more aggressively, especially in areas like IT.

The better question to ask is, how should organizations enable this ineluctable trend so that it complies with policy.

This trend is a function of strategy, culture, and technology. That is why it is going to happen anyway. Of course, one could argue that these things come in waves of centralization and dispersion.

Nimble organizations are ones in which strategy is well-communicated throughout the firm. Everyone knows where the ship is going. As the Marines say, every Marine is a rifleman. So the argument for centralization to preserve strategic consistency may be out-of-date in the contemporary enterprise.

Culture is defined as the substance behind the statement, “People like us do things like this.” In a world competing for talent, trust is key. Can we trust the people within the organization to do the right thing? If not, perhaps they shouldn’t be working here.

The central question is, can technology enable the enterprise to have its cake and eat it, too?

Traditionally, the tradeoffs have been between control and compliance, between localized intelligence and market intelligence, between speed and value.

Is there a way for technology to permit the management of these tradeoffs in a compliant manner?

The ideal tool for this purpose would give a simple user experience to people throughout the organization, experienced or not with procurement; disseminate and share market intelligence; and give them a standardized, straightforward mechanical approach to implement when acquiring goods and services.

For example, an IT line manager should be able to get data on the market for extended workforce services as it relates to, say, JavaScript coding, including leveraging resources within the firm and prior enterprise acquisition activity of such services. She should be able to find a standardized template for executing this acquisition from vendors who are vetted previously (or who can be vetted quickly). All of this needs to be subject to audit trails and oversight from the procurement function, who would be freed up to do supplier performance evaluations and contract management, creating greater value for the firm overall.

This is what we have built at EdgeworthBox.

We incorporate features from capital markets in a tool that augments the existing purchasing approach; there is no need to rip out the expensive plumbing. EdgeworthBox is a way to expose procurement’s function firmwide, for the general benefit. Give us a shout. We’d love to talk to you.

Founder & CEO, EdgeworthBox. Investor and entrepreneur. I want to change the RFP business process.

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Chand Sooran

Chand Sooran

Founder & CEO, EdgeworthBox. Investor and entrepreneur. I want to change the RFP business process.

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