There has been a great deal of talk about “procurement transformation” and not all of it has been good. Misconceptions, misperception and misinformation about procurement transformation abound.
Let’s take a look at some of the myths, and the reality:
Myth #1: Procurement Transformation is only for an organization that is failing.
Reality: Companies of all sizes and maturity levels can benefit from procurement transformation, even best-in-class performers. Whether your organization is lagging behind the competition or stands out as world-class, it’s never fully transformed. Businesses are on different parts of the road to continuous improvement. For a laggard organization, it might involve adopting a more strategic outlook. For a best-in-class business, it will likely see procurement begin to function as a risk manager, data analytics center, and even a cyber security specialist.
Myth #2: Procurement Transformation is just change for change’s sake.
Reality: A transformation initiative identifies areas for improvement while capitalizing on what a company does well. Change for change’s sake means blindly pursuing a new solution. An impactful, effective procurement transformation means assessing procurement’s current state and outlining a detailed roadmap for optimizing its every component. A truly effective initiative will allow your organization to identify the things it does well and the aspects of its operations worth retaining.
Myth #3: Procurement Transformation means automating and cutting heads.
Reality: Procurement transformation means employing your current resources as effectively as possible. Even if the transformation results in increased automation, you’ll still need team members to leverage new tools and ensure they produce the desired return-on-investment. Procurement transformation can take tactical work off their hands and free up their time to focus on more strategic, high-impact initiatives.
Myth #4: Procurement Transformation ignores other business units.
Reality: A transformed procurement unit benefits every business it touches. Effective procurement transformations result in the function collaborating with peers to identify synergies, foster collaboration, and ultimately build a stronger, more cohesive organization.
Myth #5: Procurement transformation is too costly.
Reality: The cost of an initiative will vary from organization to organization. The costs and scope of a procurement transformation depend on countless variables. Pricing will depend on whether your organization leverages internal or external resources, the maturity of the procurement function, the particular nature of the business, and more. One benefit of procurement transformation that’s often forgotten is that it can help to uncover pain points that had previously gone unnoticed. These discoveries could lead to new projects that produce additional cost savings, efficiencies, and process improvement.
Understanding the realities of procurement transformation should empower you to begin the process.