Starting a procurement organization from scratch is difficult, to say the least. Taking a bare-bones or immature procurement organization to best-in-class is an even longer and more arduous process. Even if the initiative is successful, results will generally take 2-5 years to be seen. While some technology companies will preach the benefits of their product, software alone cannot and will not manage your spend.

People are a major factor in the equation, and it takes considerable time to find, interview, and hire those with the specific skills essential for a procurement organization. In the current economy, trying to find skilled employees who can hit the ground running is an especially tall order. Most CPOs will need to settle for workers who they will need to train in specific categories, which will not only require more bandwidth on the managerial side, it will also extend the timeline to becoming a best-in-class organization.

Another major component, and one that is often overlooked, is the process. Processes need to be researched, defined, and agreed upon by all the applicable stakeholders in the organization. Items such as procurement AI or machine learning can't even be considered unless you have a sound procurement process to back them up. Building out a procurement process can mean taking a long time to integrate it into the existing work culture. If there’s currently a laissez-faire attitude towards purchases, there will be even more pushback to something as common sense as reducing maverick spend. Employees who don’t want to respect new processes will find and exploit loopholes; a process failure on the first attempt may mean there isn’t a second chance to try again.

If you are looking at starting a new procurement organization, it could make sense to instead buy a turnkey procurement organization that provides the people, process, and technology right out the gate. Additionally, it can offer significant savings opportunities in both the short-term through GPO programs, and long-term through spend analysis, strategic sourcing, and category management by SMEs with a wide breadth of experience in their areas.

Having all of this under one roof is essential as it provides a central hub for metrics and reporting, as well as total spend visibility. These will not only allow the C-suite to see ongoing success measurements, but encourage continuous improvement with strong reporting and analysis. Determining when to source new items to be added to internal catalogs, SKU and vendor consolidation, and advisory teams who can review and update processes on a regular basis all lead to a successful strategic spend management program. The good news - this is something that can be bought from the start, rather than spending years trying to build one from scratch.
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Benjamin Duffy

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