Procurement is eager to realize a digital transformation and empower itself with next-generation technology. For organizations contending with an evolving series of risk factors, the ease and efficiency promised by new solutions can look like a magic bullet. Building an optimized Procurement can start to look as simple as selecting a tool. It’s not.

Like any strategic initiative, a tech-centric one is best tackled in a series of phases informed by consistent business objectives.

Phase 1: Needs Identification

Whatever the maturity of your Procurement team and its processes, there is always room for improvement. The first step in any transformation (digital or otherwise) should be involve identifying where these opportunities for strategic growth are.

Companies should take their time to determine both what they want to achieve in this transformation as well as the most efficient ways to pursue these goals. Priorities will vary based on maturity. If an organization does not have a solidified Procurement team, for example, the visibility into spend could be lacking. They’ll want to boost visibility before pursuing other goals. An organization with a more established Procurement function may find they’re failing to maximize value from current contracts.

Phase 2: Technology Roadmapping

From a technological portfolio standpoint, companies may have a lot of gaps to fill or just a few inefficiencies. Regardless, breaking up this investments into a roadmap with ‘phases’ of its own will help streamline the process.There are a number of factors to consider when building the roadmap, but the two most crucial should be Procurement’s budget and the organization’s willingness to change. From a budget standpoint, the Procurement team should thoroughly assess the organization’s financials to identify opportunities. Taking note of management’s perspective on the initiative, how enthusiastic they are to invest in Procurement, is important in understanding how to finalize the shape and size of the roadmap. Lastly, it is vital to make sure the technology roadmap accounts for present day needs while being able to adapt to the future needs of the organization.

Phase 3: Requirements Gathering & Supplier Identification

Understanding Procurement’s true requirements and identifying capable, dependable suppliers is crucial to making the transformation a successful one. All too often, an organization will send out a lengthy, generic RFP (request for proposal) found on the internet to suppliers of all sorts. This forces the team to make their selections based little more than a price tag and a scripted demonstration. A more efficient approach sees  the Procurement team build a genuine understanding of what they need to increase their ROI and boost value generation. Once this understanding is established, Procurement can ask more specific questions of suppliers tailored to what they really need. Once the opportunities for strategic growth have been established, the transformation roadmap has been built, and the identification of suppliers has occurred, it is time to implement.

Phase 4: Implementation 

Procurement team may have identified, selected, and designed the ideal solution, but it cannot forget that change management is still ahead. Implementation is most often a people problem. In order to fully maximize the potential of the change, Procurement must  keep all relevant stakeholders informed and trained. Keeping stakeholders engaged at each stage in the process is essential to securing maintaining buy-in. Procurement should also try to take advantage of the expertise of each stakeholder group. Having key stakeholders on board will mitigate the influence of less enthusiastic parties.

Phase 5: Adoption

Obtaining the full value of any Procurement solution depends on the whole organization leveraging it correctly. Even the most robust tool imaginable is just an enabler. Without a professionals to leverage them effectively, they’ll never help Procurement realize it’s full potential. A very simple Procurement technology has great value potential, however, so long as each stakeholder is accountable and informed.

Phase 6: Measurement

At this point in time, the Procurement team has built a business case and arrived at a projected ROI. It is important to understand which specifics metrics will be used to justify this figure, as well as Procurement’s methods for collecting them, reporting on them, and defining them. Definitions can get tricky. Take “savings” as an example. .An organization should make it clear whether or not ‘soft cost savings’ such as cost avoidance will count in their ROI measurements? “Success,” too, must have a strong definition, especially where transformative projects and initiatives are concerned. Without it, Procurement will struggle to determine whether or not it has truly delivered on its goals. Always remember that maintaining your solution and monitoring its success requires ongoing effort from your organization. Following the steps outlined above will help ensure that your Procurement technology initiatives will generate a quick, substantial ROI and the function will earn buy-in for the foreseeable future.

Want to learn more about taking a world-class approach to Procurement technology? Check out Part 4 of Source One’s new whitepaper series: Building an Effective Procurement Organization.
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Michael Eveland

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