Despite their evolving, essential role, Procurement groups still tend to fall under the radar. When it comes time to carry out maintenance and repairs, many organizations look everywhere else before diving into Procurement's capabilities. This leaves the function under-resourced and makes it challenging for Procurement professionals to align themselves with the wider organization.
There are a number of reasons an organization might drag their feet on evaluating and optimizing their Procurement function. Most common, perhaps, is a lack of resources and insight. There's also often a simpler culprit: complacence. If the lights are still on, it's sometimes tempting to adopt an "if it ain't broke, don't fix it" mentality. This attitude is wildly short-sighted and forces Procurement groups that are already struggling to try and get by with fewer resources and less engagement from the organization.
Companies lacking the resources for conducting such an evaluation are often the ones who'd benefit most. Even a quick assessment of Procurement's current state may present cost savings opportunities while simultaneously bringing ineffective processes to light. For example, an assessment may reveal that recent M&A activity has left the function ill-equipped to serve the business. If it's conducted diligently and strategically, the assessment will also reveal how Procurement can refine its approach.
Why Take a Closer Look?While changing business environments and evolving strategic goals often stimulate the need for improvement, sometimes processes and tools simply grow outdated. Take, for example, a Procurement team that's become attached to a single template for its RFP documents. While that template may have been ideal in a particular category or for a particular supplier, it's possible (even likely) that's become less useful over time. Today, it might include information that's redundant, irrelevant, or just plain incorrect. A simple review of RFP design and administration practices can identify these overlooked inefficiencies and provide ways to tailor these processes to serve present-day needs.
As part of a comprehensive Procurement Transformation initiative, a maturity assessment can also provide the insights necessary for selecting the right technologies and third-party partners. Without taking the time to dig into Procurement's efforts, stakeholders might assume that the function is simply not using its technology effectively. An assessment, however, could reveal that that this technology is no longer suited to the function's needs.
Even in the best of circumstances, growing companies often find themselves leaving Procurement in the dark. Taking the time to conduct a maturity assessment will provide opportunities to realign Procurement with the rest of its peers, reopen the necessary lines of communication, and eventually repair those aspects of Procurement that need attention.
Like any other improvement activity, an assessment must be goal-oriented and measurable. For a maturity assessment to produce the necessary insights and lend itself to a Procurement Transformation Initiative, the organization needs clear goals and a means of measuring the results. These should strike a balance between qualitative and quantitative factors.
Your organization may have some or all of the following goals in mind:
- Better aligning Procurement to serve organization-wide strategies.
- Identifying actionable cost savings opportunities.
- Assessing competitiveness against market standards,
- Understanding how well current processes, tools, and workflows serve Procurement's needs.
- Determining the efficacy of processes for managing risks and enforcing compliance.
- Defining procurement processes that provide the visibility, insight and transparency needed to drive every step of the sourcing and purchasing cycles.
Next, your organization must define the “units of measure” for achieving these goals. Let’s take the identification of actionable cost savings opportunities as an example:
- What constitutes savings?
- How does your organization define “actionable”?
- What other factors are dependent on cost savings?
- Are there goals upon which cost savings is contingent?
Your assessment should reach two conclusions before you can start to embark on a Procurement Transformation in earnest. First, you need to establish the questions you want to answer. Next, you need to define what these answers will look like and why they'll prove meaningful to the organization. Only then will an assessment lead to a successful, holistic, Procurement Transformation.