In today's complex global economy, the procurement function must now respond to a number of difficult issues, in no small part compounded by the recent economic turmoil and the changing dynamics of the global supply chain.

The challenges are vast. But over the next two years, the biggest impact on the procurement functions in organizations will come from pricing pressures and attracting the right talent, according to a recent report from Ernst & Young.

The professional services organization, which surveyed 257 senior executives around the world, uncovers plenty of eye-opening results from respondents who cite a "downward pressure on prices" (cited by 33 percent of respondents) and "price fluctuations of critical commodities/service" (26 percent) as the top issues likely to impact businesses.

In addition to the low confidence in dealing with pricing pressures, the report, titled Gaining Competitive Advantage: The Procurement Opportunity, determined that "controlling and containing costs" (52 percent of respondents) and "driving EBITDA [Earnings Before Interest, Taxes, Depreciation and Amortization] growth" (37 percent) are the top two initiatives which will be a priority for the sourcing functions over the next two years.

With so much at stake it obviously makes sense to fill key procurement roles with seasoned employees that have a keen understanding of how the commoditization process works in today's environment of increasing complexity across the supply chain. Not surprisingly 30 percent of respondents from the E&Y survey said attracting and retaining talent is the second biggest procurement issue over the next two years.

Here's more:

...it is also the second biggest barrier to managing change, cited by 39 percent of respondents, just behind the complexity of the operating models (40 percent). Only 11 percent of respondents are confident of attracting and retaining the required talent.

"The high demand for skilled procurement experts, and the challenges they will face are only likely to increase with the growth of globalization and cost pressures," Adrian Edwards, global head of supply chain and procurement at Ernst & Young, said in a statement. "Securing this talent with differentiated compensation packages and a clear development strategy will be crucial."

One organization that has been successful in precisely what Edwards is talking about is Boston-Power, which recently lured former Dell, Inc. procurement whiz Martin Garvin out of retirement and added him to the board of directors. During his 11-year tenure at the world's top direct-sale computer company, Garvin helped establish the computer maker as North America's top provider of notebook computers and was deemed a thought leader in capitalizing on supply chain and procurement strategies to dominate the market.

"Martin is recognized as a trendsetter in supply chain, procurement and customer experience — with unparalleled knowledge of the notebook computer marketplace," said Dr. Christina Lampe-Onnerud, Boston-Power founder and CEO.

Yet it seems like Boston-Power's example is a diamond in the rough, especially when compared to the broader concern that faces the United States government. Government Executive recently painted a pretty bleak picture, reporting that "bolstering the size and skill of the acquisition workforce continues to be the primary goal for procurement executives at virtually all federal agencies."

"We don't have enough competent and skilled acquisition people and we can't hire ourselves out of this problem any time soon," said a General Services Administration senior procurement official who served as the agency's acting chief acquisition officer for several months earlier this year.

Fortunately, Government Executive does point out that acquisition leaders are utilizing "a wide range of strategies" to fill open positions. The Energy Department, for instance, has rehired retirees and used direct hiring authority to bring on new workers. The Homeland Security and Education departments have established robust intern programs to train new workers in contracting and related fields.

Luis Luna, the Environmental Protection Agency's chief acquisition officer sums up the talent-in-procurement-crisis this way: "We are saying to our employees, 'The work goes on, regardless of who is president or who is administrator.'

"This agency really needs to have a horizon that looks five and 10 years down the road as opposed to what we did before. If we're perfectly positioned for 1990, we are not going to be ready for 2010 or 2020. So let's not keep looking backwards. Let's look forward," Luna concluded.

Resources

Gaining Competitive Advantage: The Procurement Opportunity
Ernst & Young, July 30, 2008

Pricing Pressures and Attracting Talent are Biggest Challenges for Procurement Functions
Ernst & Young, July 30, 2008

Boston-Power Adds Dell's Recently Retired Top Supply Chain and Procurement Executive to Board
BusinessWire/MarketWatch, Aug. 13, 2008

Procurement Leaders Go Back to Basics as Administration Winds Down
by Elizabeth Newell and Robert Brodsky
Government Executive, July 24, 2008