The Journey From Purchasing to Procurement: Part 2

The blog series, The Journey From Purchasing To Procurement: Part 1 , opened with a conversation on Procurement’s ever changing and heightening role in organizations today. Which led to the impending question, is your Procurement department equipped for 2019’s expectations? We then kicked-off the identification process to determine if your department is a Purchasing or Procurement function. We discussed the key differences and attributes between a Purchasing and Procurement department leading the reader to complete the identification step of their journey.

So where do we go from here? I’m a firm believer in understanding where you are, where you can be, and what is actually attainable for your organization. A common pitfall most organizations fall into as soon as they realize there is work to be done is they shoot for the stars when in fact it may not be necessary to do so.

Other times, they don’t know what they’re really shooting for. Your transformation journey should be customized to your specific organization’s goals, mission, and industry. It’s imperative to understand that Best in Class for your organization will not be the same for others. But before you begin putting together a roadmap towards your Utopia, let’s understand what a Best in Class organization can look like and decide where in the spectrum you would want to land and work towards.

Best In Class

So what is Best in Class? Several advisory consultants would hesitate to answer that, as I am, for the reasons mentioned earlier. We don’t want organizations to shy away from improvement because the expectations appear too high or the path may seem daunting. There also isn’t predetermined prescription on how to get to Best in Class as the solutions are highly depend on an organization’s starting point or current maturity. Best in Class is also not needed for every organization. However, it is essential to recognize, what one of my esteem colleagues calls, “The Art of the Possible”. So I will share with you a few elements that stand out in a Best in Class organization.

A Best in Class Procurement organization has its pillars: People, Process, Tools & Technology, and Metrics & Reporting optimized, in alignment and enabling their organization’s goals, strategic plan, and business. In a Best in Class scenario, the Procurement function is valued as a trusted adviser and serves as an enabler to the stakeholder community. Procurement is viewed in a true partnership rather than an adversary.  

From a People perspective, Best in Class organizations have Procurement staff that is well trained, agile, and equipped to have a long term, strategic mindset. Successful Procurement organizations have employees that are capable of understanding the market/industry and the nature of the business they are in. Highly sought out Procurement professionals have mastered the art of forming true partnerships with the internal stakeholder community and suppliers in the marketplace as well as embrace skills required in the era of digital procurement. When a Procurement organization has the right people in the right roles, corrects their weaknesses through training, defines roles/responsibilities, segments tactical and strategic roles, and allocates resources effectively, that’s what we call Best in Class in the People pillar.

From a Process perspective, Best in Class can be reached when all your major Procurement processes, such as: Source to Contract/Strategic Sourcing, Procure to Pay, Category Management, Contract Management, Supplier Relationship Management, Spend Management, etc. are inclusive yet flexible enough to address the needs of your business. It is important for me to point out here that not all organizations need the aforementioned processes above. All processes should be documented, repeatable, lean, and shared throughout the enterprise. Any new or updated processes should be communicated throughout your organization, enforced by leadership top down, and stored in a shared repository. It’s vital that an implementation of a new processes/procedure is taken seriously and is carefully monitored to ensure success. Successful processes will have the right balance of agility and power that will withstand changes in the organization, mitigate risks, and allow for a scalable future.

The Technology side is where Best in Class can get tricky. It would not be fair for me to suggest what Best in Class is as the technological needs of every organization is extremely different. Every organization does not need a state of the art P2P or eSourcing platform. Your business may not need a Spend Analytics solution or Risk Assessment system. However, I do feel it is safe to say that it is 2019, therefore it would make sense that your organization is not conducting business through paper purchase orders and invoices. In addition, it is advisable that whatever technology you currently may have or want to purchase is in alignment with your business goals and will truly enable your processes.

Prior to making any technology purchases, I would highly encourage you to sit down with your IT, Procurement, and Finance teams to understand your current tools, where the gaps are, and really assess what your needs are and what you are trying to accomplish. Many organizations will shop till they drop and buy everything in the market to bolster up when in fact they could have purchased a small platform to augment what they already have.  I can assure you that when you have a well throughout business case for what you want, how much it will cost, and what the ROI on the investment will be, it will make for an easy sell to your leadership team. Ultimately, you want your technology to automate your processes, enable sound business behavior, while providing you with utmost accuracy and speed.

Finally, on the Metrics & Reporting side, a Best in Class organization will have defined key performance indicators (KPIs) or metrics. You will be able understand what is being measured, how to measure it, and consistent usage of the same methodology through the organization. When this pillar is optimized, we typically see the usage of scheduled reports, dashboards/visuals shared with the leadership team and across the enterprise to proactively address concerns and mitigate risks rather than retroactively fix problems. Best in Class organization frequently employ supplier and customer scorecards and report on metrics like savings, cost avoidance, spend under management, efficiency, compliance, and performance. The biggest thing here that propels an organization from “Good” to “Best” would be in the application of the metrics and reporting. How good is a report unless you do something with it? The organizations that use data to make strategic decisions are the ones who are truly Best in Class.