Every employee is looking for that one moment; that one achievement that catapults their career. Usually, that achievement involves either saving money or making it. A lot of it. So how do you get your fifteen minutes of fame? My career started with implementing a procurement program. Once I started, I quickly came to the realization that procurement process is difficult for many reasons including: lack of resources and expertise, and little to no executive sponsorship within the organization. So what do you do? A recent finding in “Pulse of Procurement"(i) research series indicates that “30% of the corporate leaders will NEVER be persuaded to invest in procurement powered business performance improvement.” Although this is an alarming figure, it can be attacked through a paradigm shift and can be attributed to the fact that many organizations do not recognize procurement’s ultimate value and its ability to impact organizations bottom-line line while supporting the company’s overall business strategy.
Many people have found success by highlighting the simple equation below that encapsulates procurement’s value proposition to business: 

A groundbreaking study conducted by Proxima(ii), which included an analysis of 2,000 financial reports from 2009 to 2011, found that on average, 70% of an organization’s revenue is used on suppliers; revenue spent on labor costs account for only 12.5% of total revenues. If businesses reduced their labor costs by 1%, profits would improve by an average of 0.7%. However, if the organization shifted their focus on reducing the same 1% with their non-labor costs, the profits can be increased by 4.1% - six times higher than the labor equivalent. It is important to note that these figures are averages of all sectors; the increase in profit as a result of reduction in non-labor costs by 1% can be as high as 10% within retail and as low as 1.2% within financial services. The implications of this go to the heart of procurement’s case. Rewards can be reaped for those willing to embrace the changing nature of business and think differently about how costs are managed.

But there are few things you should know before development to ensure your organization doesn’t end up with a program that doesn’t help it reach its potential. With the right approach and a few simple steps, you could easily create a successful, effective procurement program– all without fancy resources, huge budgets, and/or exhaustive timelines.
If you or your business is interested in implementing a new procurement program or optimizing an existing one, these simple steps should be followed:
1. Identify the pillars that will structure your procurement strategy.

This entails a clear vision and mission for the procurement function that is well defined and marketed throughout the organization.

2. Gauge a company-wide knowledge of procurement.

Deliberate whether or not the organization understands what procurement is, what it takes to deliver procurement capabilities and how procurement can support the company’s overall business strategy. Deficiencies in this area can be overcome through education, employing people with procurement experience and/or engaging external resources with an emphasis on knowledge transfer.

3. Develop an understanding of the culture that procurement will be operating in.

Gauge how open the organization is to sharing and collaborating. If there are any constraints such as departmental, divisional, and geographical, the program will likely evolve into segmented initiatives and siloed functions. Engagement from key stakeholders, executive sponsorship and a solid governance structure will help overcome the unwarranted barriers.

4. Define the variety of roles within procurement and their relative competencies.

The degree to which procurement is able to achieve its vision and mission is very much dependent on this. Consider the degree to which the procurement roles and responsibilities have been defined as well the skills and experiences that are available to fulfill those roles. In addition, establish the right environment in terms of motivation, career development, and reward and recognition. Deficiencies in this area can be overcome through education, training, and recruiting.

5. Isolate processes which are in alignment with your procurement program objectives.

Processes are foundational building blocks for procurement. The two most important, end-to-end processes worth noting are source-to-contract and procure-to-pay. To address deficiencies in this area, review best practice procurement methodologies and, if needed, modify the company’s methodology to encompass the unique characteristics of procurement initiatives.

6. Data: Availability, Accessibility, and Quality.

Data is critical for Procurement; the key reasons include spend analytics, supplier management, and forecasting and predictive analytics. The organization’s data management practices must be evaluated to determine if they can adequately support the procurement program.

7. Recognize and identify the tools needed for execution and follow-through.

Determine whether existing platforms can support the procurement needs and whether additional tools are required. This can range from market intelligence tools and e-auction for strategic sourcing to an electronic transactional platform for the creation and transmission of procure-to-pay documents. The resulting gaps will require evaluation, selection and deployment of tools and technologies.

8. Create a detailed, comprehensive program charter.

The program charter establishes the overall direction and scope of the program. It should be a brief document that includes information such as the business drivers, overall scope, roles and responsibilities, methodology, and business value and risks. It will also address any deficiencies identified in previous steps with a plan of action. It should be reviewed and approved by the key stakeholder overseeing the program.

The journey to a successful and efficient procurement program can be long and arduous. Developing a detailed, yet high-level outline of your program’s structure and objectives while practicing excellent resource management can put you AND your business on the right track towards company-wide savings and success.






[i] “Pulse of Procurement 2014,” Zycus Inc. (2014); 6.
[ii] “A global study of cost externalization and its implications on profitability,” Proxima (2013); 2-12. 





Share To:

Vishal Sheth

Post A Comment:

1 comments so far,Add yours