Undergoing
a full procurement transformation initiative is a major undertaking for any
organization. When performed
holistically, a full transformation assesses, benchmarks, and redesigns
procurement processes, resources and organizational structures, tools and
technology, and metrics and reporting structures to move the current state of
the department towards becoming a best in class purchasing organization. The upfront investment for this type of
engagement can be significant, and lacking departments often face challenges in
convincing executive sponsors to support a full transformation. Typically the compromise is to target the
weakest areas first, and purchase “a la carte” transformation services in one
or two of the focus areas. While this is
certainly a step above remaining stagnant, there are risks associated with
isolating certain transformation areas.
Prioritizing Metrics
and Reporting
Metrics and reporting is an area we frequently see clients push for first when beginning to undergo a transformation initiative. It is an area that makes it easy to gain executive sponsorship as the results are concrete and measurable, and can be seen as a tool to support future decision making. The issue with metrics at the forefront of the transformation is that the result is going to be a resource-intensive, convoluted way of tracking organizational performance. Without the processes in place to produce the outputs, whether cost savings, supplier performance, or other measurements of success, the numbers reported on are going to be questionable at best. Without the organizational resources available to support the metric formulation, the frequency and consistency of each report will not be up to the standards needed to support the organization. Finally, without the available tools, templates, and technology to support data management, each report is going to be a highly manual process, thus risking a lack of data integrity. Unless there are processes in place, available resources to carry out those process, and supporting tools and technology, metrics should be placed on the backburner.
Metrics and reporting is an area we frequently see clients push for first when beginning to undergo a transformation initiative. It is an area that makes it easy to gain executive sponsorship as the results are concrete and measurable, and can be seen as a tool to support future decision making. The issue with metrics at the forefront of the transformation is that the result is going to be a resource-intensive, convoluted way of tracking organizational performance. Without the processes in place to produce the outputs, whether cost savings, supplier performance, or other measurements of success, the numbers reported on are going to be questionable at best. Without the organizational resources available to support the metric formulation, the frequency and consistency of each report will not be up to the standards needed to support the organization. Finally, without the available tools, templates, and technology to support data management, each report is going to be a highly manual process, thus risking a lack of data integrity. Unless there are processes in place, available resources to carry out those process, and supporting tools and technology, metrics should be placed on the backburner.
Prioritizing Resources
and Organizational Structure
Putting staffing levels and the structure of the organization at the forefront of a transformation initiative runs the risk of incorrectly forecasting resource needs and having to make adjustments later in the process. Shifting employee titles, reporting structures, or having to downsize staff due to gained process or technology efficiencies will lead to employee anxiety and loss of trust. If starting with the organizational aspect is non-negotiable, the best approach is to start with the realigning organizational structure with current resources and ensure it is scalable during periods of expansion or contraction. Adding or removing staff should come once the department has identified and stabilized procurement policies, processes, and the technology that will be supporting those processes.
Putting staffing levels and the structure of the organization at the forefront of a transformation initiative runs the risk of incorrectly forecasting resource needs and having to make adjustments later in the process. Shifting employee titles, reporting structures, or having to downsize staff due to gained process or technology efficiencies will lead to employee anxiety and loss of trust. If starting with the organizational aspect is non-negotiable, the best approach is to start with the realigning organizational structure with current resources and ensure it is scalable during periods of expansion or contraction. Adding or removing staff should come once the department has identified and stabilized procurement policies, processes, and the technology that will be supporting those processes.
Prioritizing Tools
and Technology
Starting with tools and technology prior to understanding the processes in place and the human resources that require support can lead to purchasing a Cadillac when a Camry is sufficient. Investment in technology can be one of the largest upfront costs during a procurement transformation initiative. Prior to engaging potential providers, a mapping of current module needs and future integrations will ensure the platform selected is aligned with the current state of the organization and can support future growth.
These aforementioned risks are most apparent when an organization is starting in a laggard position in all four transformation areas. Prior to making the decision to target one area, evaluate the pillar that would typically precede it in a full transformation to ensure that bad habits will not remain in an effort to create a shortcut. A typical guideline for the order of operations in a transformation is as follows:
Starting with tools and technology prior to understanding the processes in place and the human resources that require support can lead to purchasing a Cadillac when a Camry is sufficient. Investment in technology can be one of the largest upfront costs during a procurement transformation initiative. Prior to engaging potential providers, a mapping of current module needs and future integrations will ensure the platform selected is aligned with the current state of the organization and can support future growth.
These aforementioned risks are most apparent when an organization is starting in a laggard position in all four transformation areas. Prior to making the decision to target one area, evaluate the pillar that would typically precede it in a full transformation to ensure that bad habits will not remain in an effort to create a shortcut. A typical guideline for the order of operations in a transformation is as follows:
1. Process – Establish the workflows and governing policies
that will support day to day procurement tasks.
2. Resources and Organizational Structure – Align the
resources necessary to support those tasks.
3. Tools and Technology – Streamline processes
through templates, tools, and automation software.
4. Metrics and Reporting – Report on current
performance and utilize results to drive improvements.
Overall, the best course of action is to not silo a
transformation initiative into conquering one pillar. There is always opportunity for iterative
improvement in any transformation area, and isolating the process can lead to
continuation of bad habits and unrealized efficiency gains. Source One has extensive expertise in conducting
transformations of any magnitude. Visit
our Procurement Advisory Services page to learn more.
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