The fact of the matter is that most procurement organizations struggle to do things very well or even consistently well. Certainly there are groups (often referred to by Ardent Partners as the “Best-in-Class”) that achieve great success and exhibit flashes of brilliance; many more operate at acceptable competence levels, while others still, struggle blindly. What is clear from the hundreds of research surveys conducted by the analysts who now work at Ardent Partners over the last decade is that procurement, as a profession and as an industry, offers numerous and significant opportunities for improvement. And, that there is real cause for optimism since the performance of leading procurement organizations in 2018 shows that an investment in a procurement transformation is a valuable and worthwhile pursuit, one that can deliver strong returns and have a far-reaching impact.
Additional cause for optimism is that the industry is now populated by Chief Procurement Officers (“CPOs”) and other procurement leaders who have successfully driven or experienced a procurement transformation. In fact, many of these leaders are hired into leadership positions specifically to take over a struggling procurement operation and affect a “turnaround.” But whether it is a new CPO or a long-standing leader, once a procurement organization acknowledges its challenges and develops the wherewithal to attack them, the transformations tend to begin in one of two places:
- “Upstream” or Strategic Sourcing: CPOs will frequently begin their transformations with an investment and focus on strategic sourcing solutions and processes. By leveraging the strategic sourcing process to source high-value contracts and drive significant cost savings, procurement is able to “earn” money that can be used to fund the overall project while also generating some quick wins that establish credibility and improve stakeholder engagement.
- “Downstream” or Procure-to-Pay: Conversely, CPOs that start “downstream” begin within the procure-to-pay (P2P) process. They may establish policies or adopt systems designed to guide and manage enterprise buying while also gaining visibility into current spend, contracts, and buying processes. P2P should also include accounts payable. By developing robust P2P processes, procurement can increase efficiencies, drive compliance, and establish its authority across the enterprise.
The efforts and results of an upstream or downstream initiative are certainly more complex and encompassing than what was detailed in the few sentences above. But, the larger point to be made is that procurement organizations today have largely decided to take an incremental approach to procurement transformation rather than trying to improve everything at once. Given this current day preference, it becomes even more critical for organizations commencing a transformation to think holistically across the entire source-to-settle landscape.
Indeed, the proper blend of talented people, efficient processes, and enabling technology is needed for procurement to deliver full enterprise value. Achieving the desired mix can be an iterative process and as discussed above is, most often, an incremental one. The ultimate success of a transformation initiative is dependent upon smart investments, solid execution, and dedicated follow-through across the full source-to-settle process.
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