[Editor’s Note: We continue our “Throwback Thursday” series with another look at a past entry on the skills needed for today’s procurement leaders.]
Most Chief Procurement Officers love to invest in their people. So, in that vein, over the next few weeks we will be analyzing the key skills and capabilities (or higher-level competencies) that a procurement professional (and department) should have in place in order to execute successfully. We will be using Ardent Partners’ Procurement Staff Competency Matrix that we developed with our CPO audience. This competency matrix established industry-wide capability measures for the average procurement organization.
We hope this series will help professionals and their managers to better understand and communicate what the required capabilities are for specific job roles within the procurement department and thereby help identify, develop, and deploy the people with the right skills into the most suitable positions. Professionals can also use this series to better identify where current gaps exist in their organization or within their own skill sets so that they can take action to improve or move into roles with greater responsibility (and pay).
Today’s Competency: Operational Procurement
What is Operational Procurement?
Operational procurement generally means processing purchase orders (“PO”) and managing the order with both the supplier and the internal stakeholder whose need is being fulfilled. It mostly focuses on mean tactical transition work.
In the sourcing process, the supplier is identified and a contract is executed. Operational procurement deals with managing orders after a contract has been set and more broadly how the company procures its goods and services. In an process-compliant environment, a requisition is typically created and, once approved, a procurement staffer converts it to a purchase order for a specific supplier. The PO is sent by procurement to the supplier, who then ships/delivers the goods/services and sends an invoice to their customer’s accounts payable department. The person doing this work in procurement often holds the job title, “buyer.”
Importance to the Procurement Department
Operational procurement is the engine that drives the procurement train. While it is not the most strategic area within a procurement department, it can be its most visible, with direct connections to many enterprise employees (requisitioners and approvers). For its mass exposure alone, this is an important area. Most employees will not be involved in large strategic sourcing projects but they all need office supplies. An employee who has to spend three hours trying to navigate a clunky eProcurement system and catalogs to find some file folders and notebooks will not end the process with a very positive view of procurement operations.
Second, operational procurement is ‘where the rubber hits the road’ – whatever is either saved or spent is theoretical until an order is made or an invoice is paid. Since spend under management is a key performance indicator (KPI) for chief procurement officers (CPOs) and their team, employees that regularly buy outside of procurement policies and systems erode the value delivered from established contractual agreements. Non-compliant spend is costly and without formal purchasing protocols governing a PO, systems to guide users, and an ability to track compliance, the risk of savings leakage looms large.
Tactical sourcing may also fall in this area of a large procurement operation because simply there are times, many times in fact, when there is a need for an item or service that is not currently under contract with a supplier – a new need. Depending on the estimated value of the need (meaning if it is below a certain threshold), a buyer on the operational procurement team may be tasked with sourcing the item or service by taking three bids by phone or online and sending a purchase order to a supplier instead of running a larger sourcing process that results in a formal contract.
Importance to Career Advancement
Operational procurement tends to be staffed by more junior-level staffers and offers more entry-level positions than other areas within procurement. It is an area that is important to master early in your career so that you can be promoted out of this area in the future. At the procurement executive level, it is important to understand this process to ensure that process efficiencies and compliance rates are maximized.
The CPO’s Grade
Operational procurement received a slightly better than average score of a C+, which means that Chief Procurement Officers believe that their staffs are decent when it comes to managing operational procurement. Despite this fairly average score, operational procurement skills were the second-highest rated of the 14 discussed in this research series.
How to Improve
One obvious way to improve upon your operational procurement skills is to expand your definition of “operational procurement” to include accounts payable. As procurement continues to converge with accounts payable, mastering “P2P” puts you in better position for the future of transactional procurement than knowing just one of the “Ps”.
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