What is the future for procurement?

There were few tears in adland when, two weeks ago, PepsiCo pulled the plug on its marketing procurement department.

Ironically, it said the move was driven by the desire to "be more effective and efficient". Karma is a bitch. Instead, PepsiCo has shifted responsibility for procurement to the marketers in its brand teams. A faster and more flexible process is the key motivation behind the change. The rationale is that, by being closer to the consumer, brand teams can more quickly evaluate cost versus quality as they go. This can help drive more long-term thinking. Of course, procurement’s discipline of demanding effective work needs to remain, whoever is in charge. But a more nuanced decision-making process can surely only be a good thing for agencies and, crucially, the work itself. An optimistic take on the PepsiCo move is that it represents a shift in perception from marketing being a cost to marketing as an investment. But will other clients see it the same way? Is this the end of the centralised marketing procurement department? 


Agency head

Neil Christie, managing director, Wieden & Kennedy London

"Marketing and procurement often operate separately. Setting fees is in the hands of procurement and workload is in the hands of marketing. Procurement wants lower costs and marketing wants more work. Agencies are squeezed between the two. This squeeze is transferred to agency staff and resources – agencies have to do more with less. The result is weaker work that delivers worse results. Everyone loses.

"Pepsi’s move will apparently place both fees and workload under the control of one team. If that leads to shared accountability for the value of work delivered, rather than focusing on cost-cutting, Pepsi and its agencies will all win."


Client

Jonathan Mildenhall, chief marketing officer, Airbnb

"Procurement specialists don’t necessarily have to be bad for a client/agency relationship. In fact, if managed correctly, they can ensure absolute fairness.

"I want world-class procurement capabilities within my organisation. But that’s just it – embedded ‘within’ the marketing organisation, not positioned outside. This ensures that the team is aligned to the same goals.

"For all markets, I find our primary goals are incredibly similar: world-class creative thinking that drives efficient performance; world-class partnerships, which enjoy fair compensation that reflects the value created; and simplicity – this ought not be that complicated."


Agency head

Melissa Robertson, managing partner, Now

"‘Procurement’ is the noun form of the verb ‘procure’, meaning ‘to obtain, especially with care or effort’. If that effort is a race to the bottom (don’t even start me on e-auctions), then it erodes the value of great work. If it’s about mutual benefit and longer-term relationships, it can be a positive conversation.

"Brand teams are crucial to making procurement discussions meaningful as they get the most from the partnership. If they disengage and palm off the ‘grubby’ stuff, they’re not the best clients. They should want you to feel that it’s fair.

"The best procurement people should know that, or should get out of the way."


Industry body

Tom Lewis, finance director, IPA

"This is a significant development from PepsiCo. It is another example of a leading brand owner thinking innovatively about how to balance short-term cost management with longer-term value creation. "The move by PepsiCo places budgetary responsibility firmly back within brand teams by integrating cost management with marketing activities and will allow agencies and clients to have more balanced, holistic conversations.

"It also places greater focus on maximising the return on marketing investment in both the short and the longer term – an area that the IPA has championed with its Effectiveness Awards and Commercial Certificate training."

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