In the current economic climate with organisations facing continued challenges around profit enhancement, margin focus and achieving greater capability, there has never been a better opportunity for procurement to raise its game to offer a greater return for organisations.
Going forward, it is expected that enterprise level organisations, as a consequence of the complexity of their businesses (the size, market and economic pressures), will realise that procurement needs to be operating at the heart of the business.
In this post, we’ll look at the key areas of consideration for those looking to elevate their procurement function to “World Class” levels, in order to reap the very best results.
People and processes
First and foremost, it is essential to have an aligned and fuelled procurement team with well-run processes in place to ensure that procurement earns its seat at an enterprise board level. Having the correct operating model in place is a good start. To achieve this, the need is to recognise and understand where the function currently sits and operates in the business, and have visibility of other companies and expectations within the industry that you are operating in. A diagnostic needs to be considered to have visibility of the transformation steps needed to reposition, restructure and evaluate the procurement propositions.
Things to consider…
Within the principles of keeping it simple and fit for purpose, whilst ensuring the specification reflects the business need, a world class procurement model is designed with the following considerations:
This is the fundamental starting point that will help you define how to maximise the value that you receive from possible suppliers and business partners, in alignment with your corporate strategy.
Internal Procurement Organisation
You need to structure the team with subject matter expertise so that it is aligned to the strategy of the business and its functional directorates. The team must be appropriately skilled and resourced to be able to implement the procurement strategy that you have initially laid out.
Board members will control the budgets and own their lines of business. Procurement needs to ensure that the procurement strategy is aligned with the business strategy of these key influencers to be in with a chance of real engagement.
You need to be clear on how you are going to extract the maximum value from your supplier relationships, through improved performance measurement and capability development, risk reward mechanisms etc.
Day to day purchasing
Day to day operational purchasing needs careful management to ensure it maximises value from delivery and operational efficiency and in providing a service in accordance with KPI’s that are aligned to the requirements of the business.
Providing accurate information is key to supporting sourcing decisions. As such, information management must be considered as a priority.
Measuring procurement process efficiency and effectiveness enables you to understand what is and isn’t working to continually refine and enhance. From a human resources perspective, at all times, focusing on the personal and professional development of the procurement team will help to continually elevate procurement, whilst ensuring a comprehensive change management programme is in place can provide a seamless process if team members leave.
If you want to be considered as a world class organisation, you absolutely need to have world class procurement as part of your portfolio. Those organisations who begin working to revolutionise their procurement from functional to strategically enabled will start to reap benefits that include profit enhancement through lower costs, Risk Mitigation and the ability to effectively manage supply-chain exposure, and increased organisational efficiency.
These considerations are just the initial steps in raising your procurement game.
To read the accompanying Whitepaper click here.