Procurement professionals everywhere have one word on their minds, Transformation. Tools are evolving, a new crop of professionals is entering the workforce, and the Procurement function is finally starting to secure some of the executive buy-in it rightly deserves. It's an exciting time and Procurement is understandably eager to evolve and enter a new, more strategic era.
But what does a Procurement Transformation actually look like? Is it a realistic goal for every organization?
The answer is complicated. Procurement Transformation isn't a term with single, static definition. It means something different to each and every organization. That particular definition will depend on Procurement's current state, its standing within the organization, and its goals for future strategic growth. For some companies, Transformation might be as simple as recognizing Procurement's strategic potential and beginning to invest in its growth. For others, the process will see Procurement bolster its strategic credentials and accept a spot at the executive table.
Whatever the process looks like, getting it started is often an initiative unto itself. Without a true sense of how and why Procurement should go about transforming, many organizations find themselves quickly admitting defeat. In all likelihood, these organizations skipped an essential step in the Procurement Transformation process. They've neglected to conduct a Procurement Maturity Assessment.
In theory, every organization wants to achieve best-in-class status. This lofty goal, however, is rarely a realistic one for your average Procurement team. A Maturity Assessment enables Procurement to reach a genuine understanding of its current capacity and capabilities. The exercise makes it possible for Procurement to set more realistic goals for itself and strategically target areas for improvement.
Where does your Procurement function land?
Laggard Procurement teams are stuck in the function's tactical past. There's little if anything strategic about these small, obscure groups. In fact, these folks are the sort that have earned Procurement its less-than-stellar reputation. At best, they're perceived as a necessary evil within their organizations. Cutting costs and making purchases on a reactive, as-needed basis, they're helping keep the lights on. And that's about the nicest thing you can say for them. At worst, these groups are the cause of organizational friction. That's not entirely their fault. Organizations who've never watched a more strategic Procurement function at work can't reasonably be expected to invest in building one.
These Procurement teams aren't doing much better. For a traditional Procurement function, the three-bid-and-buy process is about as strategic as the sourcing process ever gets. Purchases are still made on a largely reactive basis with little thought to anything other than hard dollar cost. Though they occupy a slightly more prominent role than laggard departments, traditional Procurement units are still mostly mired in tactical processes. Managing inventory, processing purchase orders, and renewing contracts constitute the bulk of their daily workload. Though more and more organizations are working to build strategic Procurement teams, the majority still find themselves in this spot.
Here's where Procurement starts to distinguish itself as a value-adding function. Enjoying a good level of executive support and buy-in, these teams employ a strategic sourcing process that takes into account far more than price alone. Though an augmented Procurement team isn't necessarily a leader within the business, it's earned internal respect by optimizing supplier relationships, providing for greater spend visibility, and (crucially) gathering metrics to report on its success. An augmented Procurement team looks for opportunities to boost its performance with the help of training programs, new technologies, and collaboration with representatives from other business units. If your Procurement team can count itself among this class, it's well on its way to becoming truly exemplary.
These are the rare Procurement groups that occupy a fully-strategic, highly-valued role within their organization. They have the ear of the C-suite and are trusted to drive organization-wide strategic initiatives. Thanks to a strong, consistent brand identity they have no trouble attracting and retaining world-class talent. This talent enables them to make change not merely a goal, but a cultural imperative for everyone across the business. A culture of continuous improvement enables them to stay on the cutting edge of emerging technologies and consistently refine their own internal processes.
Want help determining where your Procurement team stands? Reach out the Procurement Transformation experts at Source One today.