Procurement’s role within an organization’s value chain has long been a subject of debate and evolution. Traditionally viewed as a secondary or support function, procurement has often been relegated to the realm of cost-saving and capital allocation. However, as business landscapes shift towards broader definitions of value, the function’s position and impact are increasingly recognised as central to value creation.
In 1985, Michael Porter’s seminal work popularised the value chain model, dividing organizational activities into primary and secondary functions. Primary activities—such as inbound logistics, operations, outbound logistics, marketing and sales, and service—were deemed the direct creators of value, while secondary or supporting activities included procurement, human resources, technological development, and infrastructure. Within this framework, procurement was narrowly defined as the acquisition of inputs or resources, seen largely as a cost centre rather than a value driver. This traditional model shaped how C-suite executives and organisations perceived procurement: a role focused on savings rather than profit generation.
Yet, in today’s business environment, this perspective is increasingly outdated. The evolving concept of value transcends mere profit and market share; it now integrates sustainability, social responsibility, and long-term societal impact—dimensions often collectively referred to as “Value 2.0.” Procurement plays a crucial role in this expanded definition because it controls the gate to supply chains, influencing who supplies materials, how these materials are produced, and whether suppliers comply with quality and sustainability standards. This strategic position enables procurement to directly affect not only costs but also product quality, brand reputation, and environmental and social outcomes.
International frameworks such as ISO 20400 underscore the importance of integrating sustainability into procurement processes, guiding organisations to consider environmental, social, and economic sustainability in their purchasing decisions. This standard advocates for sustainable procurement as a means to achieve long-term value creation and competitive advantage, reinforcing the notion that procurement should be a strategic, value-adding activity rather than a purely transactional or administrative one.
Moreover, the digital transformation characterising Procurement 4.0 has elevated procurement’s status further. Technologies such as automation, data analytics, and AI are enabling procurement departments—especially in public sector and large企业—to transition from operational roles into strategic partners that drive innovation, efficiency, and competitive strength. By connecting procurement more closely with other functions such as production, quality management, marketing, and sustainability, organisations are creating a more integrated value chain where procurement is a key leader in decision-making and value creation.
Critics of Porter’s traditional model argue that it risks becoming obsolete in the context of modern value chains, which must address ethical sourcing, environmental impact, and transparency alongside profitability. The procurement function exemplifies this shift by integrating these broader responsibilities into its core tasks, thus blurring the lines between primary and secondary activities. Indeed, many practitioners today consider procurement part of the inbound logistics—and rightly so—because it directly affects what materials enter a production system and how they influence the entire supply network’s efficiency and social and environmental footprint.
Ultimately, whether procurement is classified strictly as a primary or secondary activity may depend on how an organisation defines value. If value remains narrowly focused on cost and physical input acquisition, procurement remains secondary. But if value includes sustainability, innovation, supplier relationships, and cross-functional leadership—as is increasingly the case—procurement is undeniably a primary driver of competitive advantage and value creation.
In conclusion, procurement’s place in the value chain is evolving from a traditional support role into a central, strategic function that fosters quality, sustainability, and societal impact while driving organisational efficiency and market differentiation. The challenge for organisations and their leaders is to acknowledge and empower procurement accordingly, ensuring it is fully integrated and recognised as a cornerstone of modern, responsible value creation.
Source: Noah Wire Services
