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1. PROCUREMENT TRENDS IN 2014
Migrating From Tactical to Strategic
A STUDY BY
Are GC procurement
professionals falling
behind?
The current economic growth and
development in the region provides a
massive opportunity in which investment
can be optimised with the help of
procurement functions. On the downside,
with the pace of this rapid growth,
organisations may not have the time to
develop their procurement departments
to the level that is required. Therefore, the
sector is under tremendous pressure to keep
up with the current growth.
The increasing number of mega projects
in the region, as a result of Dubai Expo
2020 and Qatar World Cup 2022, adds to
this pressure. The current standards of
procurement functions may not be sufficient
to support such developments.
“Buildings are not done well. No one pays
attention to details; projects are done for the
short term. Everywhere you look, the quality
is somewhat lacking. So projects don’t last for
long. There is also a cost pressure and when
people are negotiating they are looking for
the cheapest solutions” said Ralf Baudzus,
Chief Procurement Officer of Al Rajhi
Holding Group in Saudi Arabia. He believes
that these mega projects will elevate the
current regional standards. This also reflects
the common sentiment in the market, as
indicated in the below figure where only
6.25% of our respondents disagreed.
Only 6% of respondonts disagree
that the increasing regional growth
raises the importance of strategic,
sustainable procurement in
businesses
Agree
Strongly Agree
Disagree
6%
44% 50%
As most of the procurement experts
indicated that the development of regional
procurement functions lags behind other
parts of the world, this report is aimed at
understanding the reasons behind this
hindrance as well as finding new practices
that can help the procurement sector keep
up with the pace of the regional growth.
With the pace of
this rapid growth,
organisations
may not have the
time to develop
their procurement
departments to the
level that is required
© Informa Middle East. All rights reserved 1

2. This report is based on research done based on the responses of over 100 regional and
international leading enterprises including Shell, PepsiCo, Nokia, AADC, PetroRabigh, Qatar
Airways, National Medical Care Co and bp. The roles of those answering the questionnaire and
survey ranged from Chief Procurement Officers to Director of Procurement Services to GM of
Procurement and Contracts.
Regional Demographics
Sectors facing the biggest challenges in GCC
Aerospace/Defense
Construction
Manufactured Goods
Telecommunication
Industrial Manufacturing
Energy, Oil & Gas
Healthcare
6.93%
5.94%
15.84%
9.9%
12.9%
What is the average annual budget for procurement?
21.8%
19.8%
12.87%
15.84%
Becoming more strategic
22.8%
23.8%
29.70%
Despite this wide range of disciplines, most
of the experts that we interviewed had
similar concerns. Strategising was a keyword
that echoed across the different sectors.
Strategic procurement functions entail many
features, the predominant of which being
the alignment of procurement goals with the
overall business objectives.
Shifting the focus to more strategic functions is
a natural evolvement to procurement activities.
Nick Ford, Customer Service and Delivery
Director at Xchanging Procurement Services,
explains, “There are three key areas of focus
within a procurement organisation. Tactical
procurement entails reacting and handling
a lot of low value, sometimes high volumes
Almost
23% of
participants
believe the
second most
challenging
field is
energy,
oil and
gas
29.7% of
participants
estimated
that the
annual
procurement
spend at their
companies
was more
than $300
Million
21.8% <$30M
19.8% $30M - $60M
12.8% $60M - $100M
15.84% $100M - $300M
29.70% >$300M
tail end spend. In the middle area, there is
operational procurement which involves
working with suppliers in a more organised
manner and developing them as an extension
of the supply chain, increasing service levels
at the same time as minimising risk. Right
at the top of the tree, you have strategic
procurement which is where the function
is an essential part of business process and
strategy of an organisation, and it’s adding real
commercial, value-added services.”
The typical focus of a procurement
department that is low to medium on the
maturity curve would be 80% focused
on tactical and operational procurement
functions, while only 20% of their attention
would be directed to strategic procurement.
The catch is for these organisations to turn
80% of their focus onto strategic activities.
“Developments
in the region will
raise the profile
and importance
of effective
procurement as total
cost of ownership,
sustainability and
innovation becomes
more significant
issues. To date
procurement has
been less prominent
in the region and
now is the time to
build capability and
capacity to take
advantage of the
significant investment
and growth in the
region” Tim Drury,
Procurement Director
at Unilever in UAE
“Strategic
procurement is where
the function is an
essential part of a
business process
and strategy, and
it’s adding real
commercial, value-added
services”
Traditional Procurement Strategic Procurement
Tactical
Operational
Strategic
Tactical
Operational
Strategic
20%
35%
45%
10%
10%
80%
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3. Gone are the days of postmen and paperwork; Today procurement is
no longer a buying function focused on its spend management or on cost
optimisation; Procurement is now embedded organisational business area that
monitors supply markets and trends to interpret and respond proactively to
the impact of these trends that may have on one's organisational strategies;
Procurement functions seamlessly with the business functions of organisations
as prime key to organisation’s needs
Hariharan Laxminarayan, Head of Procurement of EMAL in the UAE
Talent acquisition &
development
This focus on minimising cost also
contributes to the lack of investment in
developing and acquiring talent in the
region. The right procurement talent seems
to be missing, according to our research
findings.
Samar Mansour, Executive Director of
Procurement, Commercial of Tourism
Development & Investment Company
(TDIC), believes that the region is full of
talent, but she blames the gap on training.
According to her, procurement professionals
are uncertain in terms of training, “probably
because of cost.” As a result, most training
providers in the region only offer generic
curricula. They would have tailored more
specific programmes if there was a demand
for them. “Companies always want the best
of the best, but they don’t want to pay.” This,
she said, is reflected in how organisations
do not attempt to offer training to fresh-graduate
employees. This is especially
necessary since very few universities in the
region offer programmes that are specialised
in procurement and supply chain.
As quality talent is essential in order for
companies to successfully move from being
traditional procurement agents to becoming
commercial strategic offices, this gap is
a setback for the sector. “In coming years
talent retention will be the biggest challenge
companies will face…Due to increased
pressure on delivering top & bottom line,
procurement is currently in the driving seat
to meet the business agenda,” explained
Ashfaq Hussein, the Senior Procurement
Manager at Mondelez.
Meanwhile, the survey results show that there
is little concern regarding the talent in the
market. Only 20% of our respondents included
talent acquisition as one of the biggest
challenges they are facing. It is not clear
whether this indicates a lack of recognition
of the issue or simply that companies
are content with the level of their staff,
considering their focus on minimising cost.
Minimising Cost
Why would one of the essential elements
of the business success be the most
challenging to implement? Minimising cost
seems to be one of the main distractions
that hinder companies from focusing on
strategising their procurement functions.
This was also reflected in the survey results
where more than 54% of respondents said
that cutting cost was one of the main drivers
for procurement.
One of the top tips from Ahsan S. Razzaq, GM
of Corporate Supply Chain & QHSE at Olayan
Financing Company is “defining procurement
value – not only looking at cost, service and
quality but while negotiating, knowing what
is the value of each negotiated items for the
other party”
48% of participants
agree that the most
pressing procurement
challenge in 2014
is moving from a
tactical to strategic
function
“In coming years
talent retention
will be the biggest
challenge companies
will face…Due to
increased pressure
on delivering top
& bottom line,
procurement is
currently in the
driving seat to meet
the business agenda”
The top 4 drivers for procurement functions in 2014
Reducing supply risk
Quality suppliers
Becoming more strategic
Cutting costs
28%
44%
51%
54%
It is a given that one of the main targets of procurement is to reduce cost and
maximise productivity. However, companies have to balance that out with a more
strategic agenda by getting more involved in commercial activities. Also, cost isn’t just
about reducing the purchasing price; it can be about reducing the cost of ownership
expenses that involve services, reliability, quality, and innovation said Ford
© Informa Middle East. All rights reserved 3

4. Supplier Management
One common complaint that was frequently
repeated is finding the right suppliers.
This issue greatly affects the ability of
organisations to migrate to strategic
procurement functions.
When asked about the quality of regional
suppliers, Evans said, “The good suppliers are
very rare around the world [not just in this
region]. The bad suppliers and the cheap
ones are still out there looking for work.”
This lack of competition makes it less likely
for unqualified suppliers to improve. So,
how to find good suppliers? “Understand
the suppliers and their cost structure” Evans
advised.
Procurement teams have to be wholly
focused on relationship building with their
key suppliers. Identifying the effective
ones will essentially optimise tactical and
operational procurement activities, enabling
organisations to focus more on their
strategic agenda. In addition, maintaining
strategic relations with suppliers and
considering them an essential part of the
organisation’s supply chain will provide a
fruitful collaboration.
“If you are achieving these two levels when
dealing with your suppliers, then you are
optimising your tactical and operational
agenda as well as using them to deliver a
more strategic function,” said Ford.
When participants were asked to indicate
the top priorities for their procurement
function in 2014, their answers indicated that
supplier management is now at the top of
the procurement strategic agendas in the
region. Similarly, up to 44% of companies
are realising that maintaining relations with
quality suppliers is imperative for the success
of their procurement strategy.
Integrated Technology in
Procurement
Different experts had conflicting views
regarding the impact of technology on
talent and, consequently, the move to
more strategic procurement functions.
Eric Evans, a UK-based Procurement and
Supply Chain Expert, feels that the increased
trend to automate has reduced the size of
procurement teams. “As a consequence,
procurement is seen as transactional and
administrative rather than as a value adding
function, because machines can only
process paper work but they cannot do the
negotiations or search of better suppliers,” he
added.
However, Ford thinks that a better
investment in technology will help keep
the tactical element of procurement as
automated as possible so that procurement
teams can focus more on developing the
strategic functions.
One of Laxminarayan top tips for driving
value from procurement is to leverage
the availability of technology and
systems towards faster, leaner and higher
performances.
44% of companies
are realising that
maintaining relations
with quality suppliers
is imperative for
the success of their
procurement strategy
“Procurement
strategies should be
set, be sustainable
and have high
level executive
sponsorship in
order to succeed”
Sam Achampong,
Chairman, CIPS
Only 4% of respondonts disagree that integrated technologies play an
important role in driving efficiencies and optimising procurement
Agree
Strongly Agree
Disagree
4%
31%
65%
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5. 75% of Ccnolinossu
organisations
invested in
procurement in
2013/2014
Experts do understand the vital role that procurement plays to
the success of business, but has this been agreed upon across the
organisation? Even though 52% of companies confirmed that one of the
main drivers for their procurement functions is to become more strategic,
more than 85% agreed that strategising them is one of the biggest
challenges that they are facing. In addition, up to 25% said that their
organisations did not invest in procurement functions last year.
Interviews with experts also confirmed that procurement officers are
struggling to raise awareness regarding the importance of procurement
with internal stakeholders within the organisation itself. Without having
the procurement officers reaching the top of their organisations and
being involved in the more strategic aspects of the business, the shift
to strategic functions cannot be complete. This hindrance can be seen
from the survey results where the second highest percentage of our
respondents said that they came from organisations where the allocated
budget for procurement is less than $30M annually.
“Procurement will
have to work hard
on demand planning
and to define long
sourcing strategies
for the coming years”
Ahmed Alrayyes,
Senior Director
Commercial Sourcing
at du
“When I was a CPO, I spent 80% of my
time selling and marketing the services
of the procurement functions within the
organisation,” confirmed Ford. This hardly
gives the procurement team the time to
focus on growth and development at all, let
alone strategising their functions.
In the meantime, Sebastian Vitzthum,
Director, Business Network Marketing at
SAP Asia, believes that “procurement teams
have often been seen as people who just say
“No”. [They] need to engage the business
to show how strategic procurement will
help them achieve their goals. Also, strategic
procurement requires a transformational shift
internally as internal processes would need
to be extended into the network of business
partners for collaboration, innovation and
commerce. Finance, Sales and Marketing,
Treasury/AP and IT can all be united in the
attempt to streamline B2B processes to
enable strategic procurement across the
value chain.”
While most of the experts seem to be
skeptical about whether the importance of
procurement – and particularly the strategic
functions of it – will be recognised across the
organisation, the regional growth continues
to put increasing pressure on the sector to
evolve and reach maturity.
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About the report
We would like to thank all the professionals who took part in this edition of the survey and
helped provide an insight on the actual priorities and challenges they face across the region.
This report cannot be considered as professional advice as it only aims to give an overview of
some timely issues.
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