Today, we’ll discuss a concept that some Chief Procurement Officers (CPOs) have made a top priority over recent years: procurement transformation.
Within the greater procurement and sourcing industry, new and exciting strategies frequently pop-up, each promising a revolutionary approach to taking the procurement function into the future (and beyond). However, more often than not, these fashionable market buzzwords fail to provide any significant value to the source-to-settle process.
“Procurement transformation” has become a common theme for those Chief Procurement Officers (CPOs) and other procurement executives who are searching for the next great advantage in an increasingly complex business marketplace. But, what does a “transformation” actually entail? There are a plethora of strategies for implementing a world-class transformation from within the procurement function, each taking unique approaches to effectively overhaul critical supply management processes and drive procurement into the forefront of strategic corporate importance.
A successful transformation design can take numerous forms as long as the initiative drives efficiencies and effectiveness and meets one major goal: drive value across the holistic series of processes within the greater source-to-settle function. Most procurement leaders understand that while automation and other improvements and enhancements to the current sub-process areas are all valiant steps in the right direction, attaining a comprehensive and cohesive end-game is how procurement transformations drive a step change in value across the larger enterprise.
We believe the following considerations will help in the proper design and execution of any procurement transformation initiative:
- It doesn’t matter where you start or finish…procurement transformation revolves around the results. There are a variety of strategies and solutions that can play essential roles in a procurement transformation. While all are critical in some sense, the order in which these approaches are implemented is not as important as the end-result of a procurement transformation effort. For example, as long as the amalgamation of supply management automation (spend analysis, eSourcing, strategic sourcing, collaboration, contract management, eProcurement and ePayables (or P2P), catalogs/networks/supplier management) results in the achievement of core goals, the order of their deployment is ultimately not so critical (That said, we have strong, informed opinions on the best approaches for different situations, so please feel free to ring us up if you’re at the outset of a transformation initiative).
- Processes and systems must be linked for maximum visibility, effectiveness and intelligence. The contemporary adage of interconnection and collaboration within the enterprise is one that will drive the procurement function into the future. Every drop of data or information that can be leveraged to build / support a sourcing pipeline, or develop a category strategy, or drive an uptick in a procurement performance metric is crucial. When processes lack automation and systems lack linkage, the ability to mine and manage spend, supplier, and other key information for maximum impact is muted considerably. For a procurement transformation to succeed, it is important to link both procurement (sourcing, purchasing, contract management, etc.) and financial (reporting, cash management, invoicing, settlement, etc.) phases within the greater organization [Sidebar: The whole finance-procurement link remains very important to both groups. In fact, we just delivered a webinar on this very topic and the archive will be available on these pages soon].
- Any investment that does not support the end-game is a waste of valuable resources. The focus for procurement transformation must be laser-sharp; any project or investment that pulls energy and attention away from the long-term organizational vision and the transformation task at hand will drain productivity and financial resources. Every decision should be made with the future state procurement department in mind. If a short-term strategy or solution does not align with this overhaul, it may make sense to table it until after the transformation journey is complete.
Ahead of a new research series that will publish later this month, next week (Tuesday August 13 at 2pm ET to be precise), I’m participating in a webinar sponsored by Zycus and hosted by the ISM.
Click the link below for more info and to register:
Built to Last: Designing a Procurement Transformation Program for Best-in-Class Performance
