Five steps for transforming the procurement function
The overall strategic importance of procurement has – against the backdrop of unprecedented change and disruption from geo-political uncertainty and macro-economic pressures – increased significantly over the last two years. As a result, the need for procurement transformation is larger than ever, writes Anna Nuttall from Procura Consulting.
It is no longer business as usual for procurement. Extreme pressures on the supply chain are forcing procurement leaders to confront the limitations of their business-as-usual approaches and drive their functions to adapt.
By transforming its procurement capabilities and further enhancing the strategic nature of the function, organisations will be much better equipped to navigate change and develop their competitive advantage.
The procurement transformation journey
Transforming the supply base and challenging what has been done in the past is crucial for unlocking the potential for step-change impact. According to research by Procura Consulting, almost half of companies globally will overhaul their entire procurement and supply chain strategies in the next 12 months, however 63% of executives (from the 400 organisations questioned) do not believe that they are equipped for implementing a supply chain transformation programme.
Many organisations are only just beginning their procurement journey. Often, they have small internal procurement functions – or none at all, with hundreds or even thousands of individuals across the business responsible for 'buying' goods and services.
This is especially so in professional services businesses such as law firms, recruitment companies and rapidly growing financial service organisations. Similarly, there are also instances where often well-known global brands don't have an effective internal approach to procurement.
And whilst transforming supply chain activities, in whichever form they are currently carried out, may seem like a waste of money, enhancing procurement capabilities can unlock huge financial savings very rapidly. Procurement is a long-established value lever in many industries, delivering substantial bottom-line profit & loss impact.
Although inflationary pressures will see the focus in coming months shift from cost reduction to cost avoidance, effective procurement can deliver significant value-add benefits through efficiency improvements, staff upskilling and reduced operational risk.
5 steps for transforming the procurement function
Procurement transformation is a journey which is unique to each organisation. Whether you are just starting this journey or have a number of procurement initiatives already underway, the following five steps can provide guidance in effectively transforming and enhancing your procurement function:
1. Understand where you are now
Organisations differ greatly in their procurement maturity – some are starting to gradually improve the function whilst others have been on the journey for many years. Understanding where you are now is vital for ensuring targeted and lasting change.
It is advised to measure and assess the level of maturity against the 8 key procurement enablers:
- Strategy & Operating Model
- People, Skills & Resourcing
- Strategic Procurement
- Supply Base Management
- Performance Management
- Supply Chain
- Sustainable Procurement
- Digital Procurement
2. Identify your target
In order to enable improvement, you must understand your desired goals. For example, are you seeking to achieve ‘Excellence’ in sustainable procurement or is ‘Professional’ level more realistic, and most importantly – what are your timeframes? Implementing a new digital procurement tool within the next 12 months might be your number one priority, so it is important to carefully identify and define your procurement targets.
3. Understand your gaps
Once you have a clear understanding of your current maturity level and your desired target level, you can easily identify the biggest gaps and therefore the largest opportunities. This will ensure that you focus your team’s efforts on the highest impact areas which will drive the most significant improvements.
4. Create a roadmap
You can’t do everything all at once. Identify your key focus areas and prioritise them based on the biggest ‘wins’ or the most urgent pain points. A tailored transformation roadmap provides the means for executing your procurement strategy in the most time efficient way possible.
5. Measure the progress
Continue to measure your progress and regularly re-assess your level of procurement maturity to demonstrate the improvements. Maintaining a clear view of the success of your procurement transformation programme is vital for ensuring stakeholder buy-in and sustaining business momentum.
