Is the writing on the wall for marketing procurement professionals?

In a surprise announcement made last week PepsiCo announced that they are to shut down their marketing procurement department. The question is why and in absence of an explanation from PepsiCo themselves there is plenty of conjecture about.

Brand teams to take over marketing procurement

What PepsiCo have said is that they are shifting the responsibility for marketing procurement back to their individual brand teams in a bid to make their operating model more effective and efficient.

The reason they say, is to enable marketing decisions to be made in real time, and as their brand teams are closer to their consumers, they believe they will be able to make decisions to balance costs against quality and value, that much more quickly.

Procurement tools will provide safety net

The decision does beg the question about the credentials of the individual brand teams in terms of professional procurement experience and expertise, but with regard to this particular concern, PepsiCo does it appears, have a comprehensive set of proven procurement tolls in place that the brand teams will be able to rely on.

It does make us wonder whether or not PepsiCo’s procurement people have in effect done too good a job. In the first place they have selected the procurement tools, put them into place and used them to successfully drive their supply chain. It could be that they have actually sown the seeds of their doom.

The ultimate cost saving?

By delivering year on year cost savings and maybe getting costs down to a rock bottom floor below which suppliers are not prepared to go, it may well be the case that the only significant saving PepsiCo can now make, is to axe the salaries of their procurement department. With good procurement tools in place that the brand teams will be able to fall back on, it must look like an attractive proposition for the board.

Could this be the start of a new trend?

While so far, this move is the first of its kind in a major corporation, the supply chain industry in general is wondering whether or not this might prompt other companies to follow suit. PepsiCo have so far only announced this move in terms of marketing procurement but it does pose the question of whether or not they might consider extending this philosophy to cover other aspects of their supply chain too.

Could the trend spread to supply chain procurement in general?

With procurement software getting smarter and more sophisticated other businesses may be a tempted to follow suit. The supply chain function itself cannot be done away with but companies may decide to cut costs by downsizing on procurement staff and integrating the more routine and programmable aspects of procurement to other departments such as IT, production, or accounts.

How effective are the procurement tools your company employs. Do you think their functionality could lead to reducing procurement staff and integrating the procurement function with another department in your company?  

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