The rapidly changing business landscape and its impact on supply chain and procurement
The rapidly changing business landscape across the world has significantly affected supply chain and procurement function in various organisations. However, few studies are focused on identifying the most significant skills associated with procurement function as well as determining how procurement skills support purchasing trends and the productivity of an organisation. In addition, few studies identify the required skills and diagnose supply chain employees with extreme skills gap threatening the supply chain function. Therefore, this thesis seeks to determine the skill-set needed by supply chain professionals to succeed in the modern business environment. The target population for this study is supply chain/procurement/purchasing professionals in various firms within the United Kingdom. These professionals are the best for this study as they have rich experience in supply chain/procurement/purchasing processes.
Major findings of the study
The study generated three major findings. First, supply chain significantly evolved from a largely clerical function to an essential strategic partner deploying cutting edge procurement skills that are responsible for producing sustainable competitive differentiation. Second, procurement skills can affect the competitive edge of an organisation; only organisations possessing and applying the right skills can attain higher performance. Third, the modern business environment is quickly becoming unique and dynamic, needing procurement professionals to be highly responsive. The study concludes that further research is required on how organisations can best handle the identification of procurement skills and addresses the skills gap in the modern business environment.
Key words: supply chain and procurement function, procurement skills
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What Skills do Supply Chain Employees Need in Comparison to the Skills they were required to possess previously?
CHAPTER ONE: INTRODUCTION
Introduction
This chapter provides the research problem and aim of the study, which introduce readers to general information about the supply chain skills. It entails the following sections: background information, statement of the problem, the aim of the study, research questions, significance of the study, and dissertation structure.
Study Background
Over the last ten years, the focus on identification of ideal procurement skill-set has been constantly increasing (Carter and Easton, 2011, P. 42). There has been a growing focus to identify the ideal skill sets of supply chain professionals, particularly over the last decade. There is a significant focus on supply chain skills in the contemporary society due to rapid changes in the modern business environment, which directly affects the skill-set for procurement and supply chain professionals (Spence and Bourlakis, 2009, p. 292). Several studies demonstrate the evolution and development of supply chain and the majority of these studies concur that supply chain function was initially considered as a clerical function (Cao et al., 2015, p. 26; Lorentz et al., 2013, p. 360; Handfield et al., 2015, p. 7;
Simchi-Levi et al., 2008, p. 27). previously, professionals in procurement and supply chain were not allowed to make buying decisions and more often, they had to fight for legitimacy (Fawcett et al., 2012, p. 650). The scope of activities of supply chain employees was immensely limited; as a result, supply chain professionals were engaged in the procurement process in later stages (Prajogo and Sohal, 2013, p. 1533). Ellinger and Ellinger (2014, p. 120) note that the limited scope stimulated poor visibility of supply chain professionals. According to Melynk, Narasimhan, and Hugo (2014, p. 1893), the supply chain was not considered a crucial function and was not a top management priority.
Provided the evolutionary development, supply chain develops through various stages towards strategic and integrative levels (Hofmann and Rusch, 2017, p. 27). For instance, Dubey et al. (2018, p. 1123) discovered four stages of the procurement function, which range from clerical, mechanical, proactive to world class. The unique procurement function is represented by the development and implementation of commodity approaches and supply chain management as the primary skills (Lutz and Birou, 2013, p. 459). Also, the evolving role of procurement function is demonstrated by Christopher (2012) who predicted an increase of outsourcing decisions and systematic strategies to structure vendors, which includes reduction of the supply base and intensive cooperation with individual vendors. Many studies concur that the transforming supply chain business environment, which is characterised with intensified global completion, growing outsourcing and offshoring as well as technical advances directly affected the supply chain function and its responsibilities (Baldwin 2012; Stadler, 2008, p. 11; Holweg and Pil, 2008, p. 390). Previously, supply chain employees were required to enhance the focus of their work and turned to e-commerce, strategic management, as well as international supplier development (Xue, Wang, and Lu, 2015, p. 1517).
Procurement evolution has aroused a broader interest in academics as many researchers seek to determine the essential supply chain and procurement skills in the current and future business environments (Anderson and Skjoett-Larsen, 2009, p. 79). World-class procurement workforce need to visualise and approach their tasks from a strategic perspective and continuously embrace their capabilities and understanding about core procurement activities to deliver both organisational and consumer objectives (Shepherd and Gunter, 2010, p. 108). Research identifies a number of procurement skills that supply chain professionals need to have to succeed in the modern business environment: strategic skills, quantitative skills, process management skills, team skills, negotiation skills, and decision-making skills (Shih et al., 2012, p. 75; Barnes and Liao, 2012, p. 890; Shi and Yu, 2013, p. 1285). Broadhurst et al. (2015, p. 32) highlight the role of strategic skills for the supply chain discipline. The emphasis on strategic competencies shows that radical shift of the procurement function from a clerical role focused on order processing to strategic, contributing to the overall productivity of the organisation. Strategic skills are essential in structuring vendor relationships and developing strategies that significantly enhance the overall performance of the organisation (Russell and Taylor-Iii 36). Implementation of strategic supply chain and procurement can dramatically assist in the establishment of mutually beneficial relations that will structure the influence of the supply chain in various organisations.
Execution of new conceptualisations and long-term focus of the supply chain function needs new skills necessary for management of relationships with vendors and consumers to achieve corporate objectives (Locke, Amengual, and Mangla, 2009, p. 321). For the longest time, supply chain professionals have been mostly followers involved in passive roles in the procurement process; therefore, they need to widen their skill sets and adopt more applicable procurement skills for competitive practices (Schoenherr and Speier-Pero, 2015, p. 124). Professionals in the supply chain profession must have proactive, innovative, as well as sharp decision-making skills to respond to the rapidly transforming business environment. Fawcett, Jones, and Fawcett (2012, p. 166) assert that the application of relevant procurement skills has become a critical part of supply chain profession. It is worth that development and focuses on supply chain skills follows the tradition of many organisations with their focus on buyer-seller associations. Without a comprehensive knowledge of procurement skills, performance improvement cannot be efficiently managed, suggesting that effectiveness cannot be attained in organisations.
Problem Statement
The rapidly changing business landscape across the world has significantly affected supply chain and procurement function in various organisations. Constantly advancing technology has stimulated rapid changes in procurement where the role of procurement professionals has shifted to strategic roles. Consequently, decision-making in procurement is based on competencies and knowledge unlike when the function was largely transactional. Today, the role procurement professionals need new competencies for achievement of optimal results. It is worth noting that procurement skills have been focused on human resources frameworks for many decades; however, the focus has shifted to specific skills-set due to evolution of procurement.
Supply chain skills were not prioritised while executing the tasks in the supply chain function and were not of interest for practitioners and academicians. It is essential noting that this perspective on supply chain skills has significantly changed. Growing academic attention has been witnessed, particularly over the last decade. Few studies are focused on identifying the most significant skills associated with procurement function as well as determining how procurement skills support purchasing trends and the productivity of an organisation. In addition, few studies identify the required skills and diagnose supply chain employees with extreme skills gap threatening the supply chain function. Therefore, this thesis seeks to determine the skill-set needed by supply chain professionals to succeed in the modern business environment.
Study Objective
The aim of this study is exploring the skills supply chain employees need in comparison to the skills they were required to have previously.
1.5. Research Questions
a. How has evolution of procurement affected the development of the procurement function?
b. How do previous and current procurement skills affect development of procurement function?
c. What skills should a supply chain professional possess in the future?
The Significance of the Dissertation
The results of this thesis add to the existing studies on supply chain skills as it provides a detailed overview of procurement and supply chain skill-set both in the past and contemporary business environment. While current procurement competences and their role are critical, it is crucial to disclose the extent to which these skills are implemented by supply chain and procurement professionals. Lastly, this study identifies managerial implications and future research needs that are critical in supply chain discipline.
Dissertation Outline
This study consists of five main sections. The first chapter provides the research problem and objectives, introducing the general reader about the supply chain skills. The second chapter gives a theoretical review of the literature on procurement skills. Chapter Three presents the research methodology through which the study is carried out. The fourth chapter presents data analysis and discussion. The fifth chapter provides the conclusions and recommendations for further research. .
CHAPTER TWO: LITERATURE REVIEW
Introduction
This chapter reviews current studies on supply chain skills adopted in various organisations across the world. This chapter gives an extensive review of the supply chain skills needed in this discipline due to the rapidly changing business environments. It is divided into four sections: Evolution of Procurement, Procurement Skills, Future Supply Chain Skills, and Literature Gaps.
Evolution of Procurement
Procurement is the act of buying products, services or works, and the purchasing and supply chain departments are usually responsible (Carter and Easton, 2011, p. 44). Procurement is typically part of the strategy of an organisation since the capability to purchase some materials determines the continuity of operations. In addition, procurement is described as the process of acquiring products, services, as well as works (Spence and Bourlakis, 2009, p. 292). The procurement process starts from the identification of a product through to its disposal. Procurement entails eight main stages: planning of purchases, determination of quality, development of specifications, evaluation and selection of vendors, value assessment, funding, negotiation of price, and finally making the purchase (Simich-Levi et al., 2008). Overall, procurement process involves an appraisal of available options and critical sourcing decisions.
Janvier-James argues that the procurement concept has always been present though not in the same manner currently, which is highly regulated (2012, p. 194); people and businesses have ever had to buy products, materials, as well as labour to complete projects. A number of the first global business records emanate from sourcing collaborations between China and Greece thousands of years ago, providing the earliest example of procurement and supply chain mechanisms (Holweng and Pil, 2008, p. 390). Even though it is likely that the procurement practices in ancient times were less complicated and characterised with slavery, some of the works completed in ancient times still stand in the modern world, which suggests that several years before contemporary technology, robust procurement processes were in existence (Shepherd and Gunter, 2010, p. 105). Moving forward, procurement and supply chain is no longer as simple as acquiring products from point A-B, as it is about comprehending and implementing a complex set of variables. International competition, changing economies, as well as new supply chain challenges have induced the focus on the need for procurement leaders to establish approaches that can facilitate and produce sustainable competitive advantage.
The traditional procurement organisation is changing, and it is set for significant, significant changes going forward. Just like other business departments/functions, procurement is adapting to the demands of the 21st century by taking on a more critical role in operations of the overall business (Benjaafar, Li, and Daskin, 2013, p. 101). Research shows that procurement is moving from a more transactional part to a more strategic role (Christopher and Holweg, 2011, p. 64). According to Locke, Amengual, and Mangla (2009, p. 320), this implies that procurement is increasingly becoming important. It is starting to perform an essential role in the overall mission and vision of organisations. In modern-day management, chief procurement officers occupying seats on the corporate board of directors is becoming more apparent.
According to Stadler (2008, p. 11), procurement has significantly changed in three main ways: first, as highlighted, a more strategic approach to supply chain management; second, technology development; third, modern slavery abolishment. Supply chain management is much more structured compared to about a century ago (Russell and Taylor-Iii, 2008). Today, proper strategies are required to keep supply chain risks to a minimum especially since the part that the supply chain plays in its daily operations has considerably grown. According to Melnyk et al. (2009, p. 4629), this implies that the visibility of supply chain is very critical internally as well as externally (especially on a consumer), which has been particularly evident in many organisations.
Technology advancement has performed a significant role in transforming supply chains. For instance, technology has offered new strategies of managing vendor data to enabling purchases to identify all types of data regarding parties they do business with via technological systems, which implies that technical solutions brought about in procurement will be long-lasting (Tassabehji and Moorehouse, 2008, p. 56). Even though technology might have started playing a significant part in acquisition about five decades ago, it is the most substantial change to have changed the procurement practice since its introduction (Burt et al., 2012). Modern slavery elimination is described as the intermediate step in the future management of procurement. Even though traditional forms of slavery were eradicated in the 19th century, it has been evident in supply chains since the ancient times; slavery is still present in some parts of the world (Xue, Wang, and Lu, 2015, p. 1517). Today, purchasing parties can be considerably punished if their procurement processes are found to have a modern form of slavery, which can damage their finances, legal standing, as well as reputation permanently.
In the past, procurement was more transactional; it typically used a tactical approach to sourcing (Anderson and Skjoett-Larsen, 2009, p. 76). Most organisations made their daily buying decisions mainly based on pricing and delivery times. Carter and Easton (2011, p. 45) assert that procurement did not fully incorporate the corporate strategy in its purchasing decisions. In modern society, a significant change has occurred, and procurement teams have begun adopting more strategic approaches. Consequently, the supply chain started having additional needs. For instance, in today's business environment, procurement is required to involve all critical stakeholders in procurement-related decision making for optimal efficiency. Russell and Taylor-Iii (2008) argue that procurement needs to work in close association with different structure present in various firms. In addition, procurement has to discover ways of creating and providing more value to companies. According to Spence and Bourlakis (2009, p. 294), they have to concentrate more on reducing total ownership cost instead of upfront costs and claim more control over the procurement practices of a firm.
However, the evolution from transactional to transformative procurement processes brings about a number of challenges. Similar to any form of transformation, procurement is characterised with a number of problems that can serve to hinder progress, implying that organisations will need to have a plan on how to overcome these obstacles. Management of several vendors is a major procurement challenge in the contemporary business environment (Baldwin 27). Today, a number of companies juggle several suppliers, spreading their spending power over several various vendors. Stadler (2008, p. 15) claims that the spread of spending power across suppliers dilute the purchasing power of organisations, making it more challenging to achieve effectiveness. Management of several supplier relationships makes procurement teams spend significant time to keep up with purchases and management these vendor relationships. The main issue with the administration of many vendors is that supply chain teams might devote substantial time and financial resources because it is challenging to optimise its supplier relationships (Simchi-Levi et al., 2008). This situation has necessitated consolidation of suppliers to address this problem.
Consolidation of vendors comprises a number of benefits. First, management of a small number of suppliers means that considerable time spent in vendor relationship management is reduced (Janvier-James, 2012, p. 194). Most organisations use the time saved to make procurement teams more effective. Second, consolidation means increased purchasing power, which leads to low prices. Holweg and Pil (2008, p. 395) argue that when vendors realise that organisations are willing to invest in them more, more likely, they will provide such organisations better pricing and terms. Third, consolidation of vendors reduces contract noncompliance risk (Baldwin, 2012). When procurement teams have fewer contracts to concentrate on, compliance or adherence to such agreements becomes easier. Lastly, having fewer suppliers suggests better relations (Stadler, 2008, p. 21). With procurement evolution, seeing suppliers as partners are becoming a common trend and establishing better relationships will help organisations to achieve this. Vendor consolidation is not natural; it needs a considerable amount of resources.
Overall, times and industries are fast changing; hence, organisations seeking to remain competitive have to change as well. This implies that procurement departments are required to evolve to meet the increasingly changing company needs. The business setting in the modern world needs organisations to change as well as move from transactional approaches to more transformative approaches; they need to adopt strategic procedures to allow procurement to have more spending power. It is worth noting that when organisations find ways of addressing supply chain-related challenges, procurement function becomes better equipped to perform a prominent role in the daily operations of organisations.
Procurement Skills
Nearly two decades ago, the procurement manager in the majority of the organizations held a title such as Vice President of Logistics (Simchi-Levi et al., 2008), which was mainly a functional duty that dependent on technical skills in distinct areas including shipping route understanding, strong understanding of the freight rates and fuel costs, and warehousing equipment and distribution-centre location familiarity. Traditionally, the supply chain leader reported to the COO or CFO and did not occupy any seat at the executive committee (Spence and Easton, 2009, p. 59). It is essential to note that the manner in which organisations view supply chain managers has considerably transformed; therefore, this means that different eras demand different skill-sets in supply chain management.
Presently, the need for supply chain managers is much more than the functional expertise (Shepherd and Gunter, 2010, p. 107). It is essential noting that supply chain leaders are still required to be experts in the management of supply chains vital roles such as transporting, warehousing, management of inventory, and planning of production (Russell and Taylor-Iii, 2008). Nevertheless, the process of supply chain extends end-to-end within or even without the company, which includes the vendor and client relationships on an international basis (Locke, Amengual, and Mangla, 2009, p. 328). Today, the majority of the leading firms consider functional procurement managers as necessary executives to manage the end-to-end procurement process, although they do not have total control. Companies need to invest in top procurement talent through recruitment of people with process skills, not only functional expertise. The evolution of procurement inescapably results in the change of the procurement executive role from functional-centred to that of process-centred (Benjaafar, Li, and Daskin, 2013, p.106), as well as to supply chain leadership being involved in executive decision-making.
The modern business environment dictates that supply chain leadership becomes part of the executive team (Christopher and Holweg, 2011, p. 69). In an increasing number of organisations, the procurement leaders of highly productive firms do not just have access to the executive team; they are part of the executive management team. According to Carter and Easton (2011, p. 61), this responsibility requires the need to stimulate value in terms of training the chief executive officers and the board of directors as well as equipping them with language to use in procurement subjects and its essential role in creation of economic benefits, but most importantly in discovering and utilizing opportunities to increase economic benefits to the organization. Melnyk et al. (2009, p. 4634) note that the role of procurement in progressive companies is no longer mainly functional, but rather strategic, which influences about 65 per cent of a firm's total costs (Burt et al., 2012), inventory, and customer service aspects.
According to Xue, Wang, and Lu (2015, p. 1531), top talents can be acquired after its identification. Selection of the most qualified people to oversee the increasingly pivotal procurement role, senior management teams have to know blueprints for excellent supply chain managers. These attributes are classified into five: global orientation, technical savvy, superior business skills, system thinking, as well as inspiring and influential leadership (Tassabehji and Moorehouse, 2008, p. 62). It is worth noting that procurement leaders do not have a monopoly on these attributes. All procurement executives must have similar skill-sets (Stadler, 2008, p. 31). Overall, the unique procurement needs arguably make the discipline to stand out from other functions in various organisations.
Today, every senior executive is required to be capable on a global scale (Schoenherr and Spier-Pero, 2015, p. 121). Worldwide sourcing and supply chains for both retailers and manufacturers have tremendously developed in recent years. Only a few organisations do not source and sell globally or intend to go global (Prajogo and Sohal, 2013, p. 1533). Therefore, procurement managers have to manage companies that extend across the world and effectively deal with vendors and clients globally. In addition, procurement managers need to embrace the new cross-functional and cross-organisation complexity dimension (Fawcett, Jones, and Fawcett, 2012, p. 164); this is the challenge that comes with thinking of the supply chains as systems. Procurement and supply chain professionals should understand the links and associations cutting across logistics, production, and marketing/sales (Christopher 2012). Moreover, the supply chain executives have to absorb the complexity of interfaces with vendors and clients outside the company (Ellinger and Ellinger, 2014, p. 119).
Van Hoof and Thiell (2014, P. 239) observe a small but increasingly developing number of supply chain professionals are becoming the essential employees within an organisation. According to Barnes and Liao (2012, p. 888), professionals in the procurement and supply chain field should enhance interpersonal connections required to create credibility. They need to have team building skills and should be able to communicate their message in convincingly to all critical and relevant stakeholders of their companies. In modern society, procurement managers find themselves in influential positions within organisations, providing them with opportunities to create unique supply chains. Hohenstein, Feisel and Hartmann (2014, p. 435) argue that supply chain leaders are masters at establishing close collaborative relations with leaders from other disciplines such as marketing, human resource, as well as finance to get the entire picture.
Research shows that with advancing technology in the 21st century, supply chain professionals need to have credentials in IT systems (“Henry”, Fawcett, and Fawcett, 2013, p. 206). However, Shih et al. (2012, p. 70) claim that supply chain managers need not to have credentials in IT systems, but they need to develop a close working association with IT experts within their organisations. Fawcett et al. (2011, p. 649) argue that supply chain managers need to have dealt with technology selection challenges, implementation, application, and be alert for next-generation technical tools, particularly the ones used in procurement operations. In addition, Dekker, Sakaguchi, and Kawai (2013, p. 125) assert that procurement and supply chain professionals should be wise to handle inherent implementation challenges in the complexity of purchasing software solutions in the current era. In addition, procurement officers have to easily speak the language of senior executives (Bernon and Mena, 2013, p. 441). Bouncken et al. (2015, p. 578) argue that phrases like ROIC, EBITDA, as well as economic profit, needs to part of the daily parlance of the procurement professionals. More often, issues in the supply chain are not comprehensively understood by the top management teams in various organisations (Shi and Yu, 2013, p. 1284); therefore, supply chain professionals need to explain the language they understand.
Overall, demand for the most skilled procurement and supply chain professionals is set to continue rising (Lorentz et al., 2013, p. 359); thus, recruitment and retaining them is set to keep taxing the best companies. A number of people would claim that acquisition, development, and maintaining the needed skills is essential to establishing a reliable supply chain (Broadhurst et al., 2015, p. 30). However, finding people with the right procurement skills brings a dynamic challenge due to the cross-organisation as well as cross-functional challenges that should be adopted (Marra, Ho, and Edwards, 2012, p. 6104). Therefore, the knowledge on the kind of skills supply chain employees need is essential and critical in procurement and supply chain management.
Future Supply Chain Skills
Traditional thinking about supply chain management is undergoing a significant transformation (Lacy, Haines, and Hayward, 2012, p. 347). Today, management teams across various organisations recognise that strategic purchasing is a vital competitive element for companies, and has to be aligned with vendors and clients in the supply chain within an organisation (Fawcett and Waller, 2014, p. 160). The current era is characterised by hyper-competition; thus, the role of procurement in many firms is increasingly becoming strategic (Van Weele and Van Raaji, 2014, p. 57). The focus on supply chain management entails expansion of its main processes to entail roles such as vendor development, supplier management, costs analysis, vendor market analysis, outsourcing decisions, benchmarking, and strategy formulation (Pettit, Croxton, and Fickel, 2013, p. 48). Strategic competencies are desired more by several firms when compared to conventional purchasing skills. Changing supply chain management is stimulated by the changing business environment caused by increased internationalisation, technology advancement, increased senior management demands, as well as internet-based systems (Scholten, Scott, and Fynes, 2014, p. 212).
