Disruptive talent shortages are being experienced by a number of industries. We often think of data sciences and healthcare as prime examples. However, procurement is an industry that is already seeing a noticeable shortage of skilled and experienced talent.
The procurement industry's talent requirements are further complicated and made more pertinent due to the fact that supply chain professionals' value to their organizations is increasing, making their skills and experience more impactful on the whole.
One individual can be in charge of hundreds of millions of dollars, and their performance can make or break the company. A wrong move by an inexperienced agent can have disastrous consequences.
In this article, we will provide an overview of the current state in procurement regarding scarcity of talent, as well as investigate why procurement outsourcing might be the best way for companies to address this particular issue.
Current State of Procurement Talent
Back in 2010, MIT's Center for Transportation and Logistics came out with a white paper called Are You Prepared for the Supply Chain Talent Crisis where they predicted that the industry will experience a noticeable shortage of supply chain talent due to a number of various factors. It is important to remember that this was shortly after the Financial Crisis of 2008 when talent shortages were not exactly the most common of problems.
In their 2014 article, A Supply Chain Talent, Kusumal Ruamsook and Christopher Craighead quote R.J. Bowman, who states that the supply chain industry’s talent demands already (at the time) outweigh supply by a factor of six.
DHL’s whitepaper on the challenges of automotive industry supply chain, Solving the Talent Crisis: Five Alternatives Every Supply Chain Executive Must Consider quotes the CEO of BlueWorld Supply Chain Consulting, Jake Barr, who mentions the same 6 to 1 ratio and who adds that in the future, the ratio might be as high as 9 to 1.
In this same whitepaper, the DHL authors go a step further and break down the shortage according to job profiles, with the supply chain talent gap at entry level being 26%, at the executive level being 9%, and at the middle management level being a whopping 54% percent.
Taking all of this into consideration, there is no denying the fact that the supply chain and procurement industry already battle a talent shortage.
Factors Behind the Talent Shortage
As is often the case, there is no one single cause for the talent shortage in the procurement industry and, instead, we are talking about a combination of numerous factors.
The first factor that contributes to the shortage of procurement talent is the increasing speed at which procurement management is evolving. The procurement process itself is growing in complexity, with an increasing number of players being involved in various stages of the procurement lifecycle.
When this is exacerbated by the ever-increasing influx of new technologies into the industry, finding procurement professionals with practical experience and complete skillsets becomes an almost impossible task. This demand for advanced skillsets is why middle management positions are particularly difficult to fill, as indicated in a more recent DHL survey of supply chain professionals.
It is also important to factor in the increased involvement of the C-suite in the matters that had previously been left to procurement’s own resources. In other words, more stakeholders are requiring insight into procurement practices, resulting in growing need for procurement managers with diplomatic skills, as well as those who will understand the interaction between their department and other business groups within a company.
The emergence of new markets, from India to Bangladesh and Vietnam also requires experience in dealing with suppliers from these parts of the world; experience that is hard to come by.
Another factor that is often identified as significant, especially in Western Europe and the United States, is the growing demographic gap that permeates procurement and supply chain management, in general. Too many people who do procurement are close to retirement and the replacements are nowhere to be found.
Christiane Beimel, Vice President of Value Added Services, DHL Global Forwarding – Germany put it very succinctly, “There simply aren’t enough young people to backfill the pipeline.”
A big part of this is the poor state of supply chain-oriented education. For example, according to the International Business School Data Trends, published by the Association to Advance Collegiate Schools of Business, only 2.7% of business schools offer specialized master's programs in supply management and logistics. Other program levels are even less common.
Once again, this creates the biggest problem at the middle management level. It is possible to retrain unemployed young people to prepare them for the entry level procurement jobs; it is impossible to fast-track their development and make them experienced enough for middle management.
Value Added by Talent vs. Overhead Costs
All of the above is further complicated by the fact that the value to an organization of supply chain professionals is increasing as traditional procurement processes are perfected and cost-cutting becomes harder to come by. In combination with a shrinking talent pool and labor costs being significantly higher than in the past, this makes finding the right individuals a big challenge and adds significantly to the overhead costs.
In addition to this, onboarding and training on the job only adds to these overhead costs.
How Procurement Outsourcing Solves the Problem
A procurement outsourcing company such as Central Trading Agency, with more than 60,000 one-off purchases for a client like Boeing and a database of over 5,000 suppliers, is perfectly poised to solve talent issues for the majority of companies facing this issue.
For one, an outsourced procurement service provider (PSP) such as CTA employs procurement professionals who have lived through every single transformation that the modern procurement management has experienced, including the introduction of the latest technologies.
Moreover, outsourced PSPs are the first to venture into new markets and build supplier relationships there. This ensures that their clients receive the value of established supplier relationships and do not get into contracts that will jeopardize their standard operations.
Perhaps the most straightforward way to understand the value and the cost-effectiveness of outsourcing procurement as a solution to talent shortage is to compare it to the alternative.
Basically, a company that wishes to hire in-house talent has two options to choose from. They can pay premium costs to find and recruit top talent with all the right skills and decades of experience which is a sizeable investment. Alternatively, they can find less experienced procurement professionals whose training, onboarding and attaining of experience will cost the company money on a more continuous basis.
It should also be pointed out that the economy is stronger than it has been in a long while, which makes competition in the labor pool even greater.
Once all of this is factored in, outsourcing procurement and tapping into skilled and experienced talent pool that comes with outsourced procurement service providers makes more sense than ever before.
In the end, it all comes down to the best ways to leverage an organization's time and resources and this is where procurement outsourcing is the superior solution. Without adding to overhead costs, an organization can reap the benefits of having skilled, trained and experienced staff handling the most time-consuming procurement tasks (one-off procurement, low-value items, specialized supplier marketplaces) in a way that will add the most value to the organization. In addition the organization can take advantage of supplier databases and supplier relationships which have been painstakingly developed over many years enabling greater efficiency throughout the procurement processes.
Closing Word
The trend of procurement talent shortages has created effects which are already being felt, and will only become more prominent over time. Procurement outsourcing offers a long-term solution to maintain the high-level of talent without increasing an organization's overhead costs.
We at Central Trading Agency are in a unique position to help you deal with the procurement industry’s talent shortages. Contact us and we can provide no-charge consultation to see how we can help you with these issues.