? However, the fact is that the procurement function, at whatever maturity level is operating, it is either adapting or changing as a reaction to major shifts taking place globally and accelerated growth – organic and inorganic. As markets continue to become more complex, volatile and risky, the procurement function may choose to be reactive while operating in a status quo or become proactive to gain a competitive advantage for their organizations. This includes organizations that have plateaued and are in need of innovative ideas and approaches to create new sources of value. In other words, Procurement is in a continued state of transformation, the question is whether companies choose to own and control their own transformation efforts.
Where to start?
The first order of business should be to understand and map the procurement footprint of the organization, this includes processes/policies, systems/technology, and its workforce. This will help companies understand the role of the current procurement organization and to rethink a new Procurement governance model. The goal for the procurement organizations is to become valued business partners and sourcing experts, as opposed to becoming gatekeepers or administrators. Furthermore, gaining the stakeholders’ perspective and understanding their business needs will begin to open up doors into the business operation and increase the understanding of the company’s goals and objectives. Additionally, engaging with a handful of key or major suppliers, as may be determined by high spend or business-critical activities, can identify quick-wins that can help demonstrate the procurement value to the business and start to gain stakeholders’ support.
What is Your Approach?
Procurement leaders must clearly define the direction of their organization and design a communication plan that will resonate across the enterprise and become the mantra for the new Procurement organization. Most companies announce procurement transformation that will deliver an $X amount of savings and while this is certainly a measure of success, it may translate to budget owners as a constraint and a cumbersome process to achieve these cost savings. The focus needs to be on designing a procurement engagement model that is attuned to the company culture, fosters supplier relationships and defines a technology roadmap that eliminates, automates or outsources procurement tasks that do not add value. If done right, cost savings will follow.
Key enablers for Procurement Transformation
The procurement function in itself is a key enabler to achieve corporate goals by contributing to an assurance of supply, accelerating innovation and time to market, driving company standardization and optimizing working capital and cash flow. Therefore, procurement enablers are necessary to support these corporate goals and to successfully design and operate the procurement organization. However, key procurement enablers are on the eye of the beholder, so let’s focus on defining value, cultural shift and success indicators, which are instrumental for defining a clear vision for any transformation initiative.
Value to the company may have had a different meaning to the various business units, whether it is manufacturing operations, sales and marketing, research, and development, as well as the support functions. However, in the big picture procurement may define value as providing solutions to stakeholders that deliver better quality, lower cost, and improved experience for the end customer. In manufacturing operations this may mean identifying the right suppliers to gain speed to market or for the marketing team, creating a differentiator in the market. Therefore, getting closer to business operations will help design sourcing strategies that are aligned with corporate objectives.
A cultural shift is inevitable with any organizational change therefore, new behaviors need to be recognized and induced to facilitate transformation. This can include seeking stakeholders’ feedback on procurement performance, establishing outcomes-based metrics, and building powerful relations that allow the business stakeholders to tell the stories. Additionally, the right procurement talent will be needed to complement the partnership with the business.
Measures of success will need to be mutually defined and aligned with mutual business performance objectives to ensure the right business focus. Procurement will realize they are adding value when the business seeks their support and solutions.
Therefore, value, culture and performance measures are necessary to successfully address the procurement enablers, as well to support operational procurement processes. As a minimum, key procurement enablers can be identified as procurement analytics, supplier relationship management, staff, and technology.
Procurement Analytics to capture and use data to support fact-based decision making and procurement strategies to gain stakeholders’ buy-in.
Supplier Relationship Management efforts to drive a consistent and structured approach of interacting and managing suppliers, while creating opportunities to uncover additional value.
Procurement Staff development and training is key to ensure people are placed in the right position with the skill set required to engage with procurement influencers.
A technology roadmap for sequencing and developing underlying technology enablers is paramount to gaining procurement efficiency and to free up the staff from tactical activities.
Performing an initial assessment of the procurement organization will provide the information needed to define the strategic direction for the procurement organization and the role that it will play to contribute towards the company’s business objectives. As a result, the benefits will be identified and prioritized to serve as the basis for building a business case for the company’s procurement transformation.