Procurement transformation has become a familiar topic here on CPO Rising, particularly over the past couple of years when it has become increasingly clear that what got procurement departments where they are may not get them where they need to go. Ardent Partners believes that Chief Procurement Officers (CPOs) and other procurement leaders need to foster innovation at multiple levels in order to elevate the procurement organization and the enterprise as a whole to the next level of performance. Put another way, procurement transformation cannot and should not be attributed to any one particular factor; people, processes, technologies, stakeholder relationships, and knowledge management each need to be regarded as causal – and instrumental, really – in driving forward procurement transformation within an enterprise.
Each of these variables is significant in their own right, and their importance should not be understated. That is why procurement transformation needs to be broad-based – it needs to account for each of these aspects in order for a lasting and successful transformation to take root within an organization. Thus, this new series will examine each facet of procurement transformation in greater detail, and shed further light on what CPOs and their teams need to do to successfully implement a holistic procurement transformation project. Today’s installment will focus on establishing and streamlining processes to keep this project on track.
How to Transform Procurement in Five Steps – Step Two: Processes
For CPOs and procurement organizations that recognize the need to transform, processes can be tactical roadmaps to strategic success. But sometimes, when teams start out, they realize that they either have too little or too many processes (or too complicated processes) to efficiently and effectively get them where they need to go. As a result, a successful procurement transformation project needs to simplify, standardize, and ideally automate processes for maximum effectiveness and efficiency. Let’s take it from the top.
Business process engineering or reengineering can often become a self-defeating exercise in process overkill, particularly in large organizations where bureaucracy and complex interdependence make for kludgy processes that people quickly disregard in favor of legacy processes and practices. Something that has 97 steps will be practically impossible to follow for a person that was used to doing it in 3 steps, even if it was insufficient. This may be a bit of an exaggeration, but the point is that in order to “do” process improvement well, organizations need to keep it simple enough so that they will be followed while preserving the integrity of the process so that it remains viable.
From there, the process needs to be standardized across the procurement department, codified for reference, instilled with practitioners, and explained to constituent stakeholders across the enterprise (e.g., product development, manufacturing, legal, HR, Finance/AP) so that all parties understand the “rules of engagement.” Staff often have to negotiate tricky situations in which they are asked to cut corners, do someone a favor, or make an exception on behalf of someone outside of the department or someone that is not familiar with its processes. Of course, procurement organizations need to be agile and nimble enough to move quickly or know when to make exceptions. But exceptions should not become the rules. Having a process on the books also makes it less likely that new comers will feel the need to “reinvent the wheel”, and instead, rely on proven best practices to get the job done.
Lastly, procurement organizations should seriously consider automating their processes for maximum effectiveness and efficiency. Manual, paper-based processes are out, while automated, digital processes are in; and one cannot discuss process automation without also discussing technology solutions. They are force multipliers for understaffed and overwhelmed procurement teams that are consistently being asked to perform more or better with the same resources. Automated technology solutions are repeatable and scalable, and they can allow practitioners to move from tactical, low-value but high-touch activities to strategic, high-value planning and problem solving. Understandably, not every procurement organization will have the budget for process automation, but their value proposition is considerable.
Conclusion
Processes should provide the guidance for the successful implementation of procurement activities and projects; they should not deter staff from following best practices in favor of “reinventing the wheel” or doing their buddy in accounting “a solid.” They need to be sensible, simple enough to follow, nimble enough to be agile, and where possible, automated to provide maximum scale, repetition, and efficiency.
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