Procurement Transformation: Why Excellence Matters

adminJanuary 23, 2024

Procurement departments tend to be less visible to many stakeholders than sales, operations, or even finance departments. But the impact on everything from profits to product quality and service delivery should not be overlooked. This is why “procurement excellence” is so important. A worthy pursuit.

Optimizing your procurement function can help deliver successful business outcomes, including:

Reduce sourcing/demand management costs by 12-20%
95% improved compliance rate
30% of incremental spend under management
35% reduction in contract value outflow

Procurement Innovation

If you don’t see these kinds of numbers in your organization, you may be a great candidate for transformation. The first step in your journey is to understand where you are and then use that information to decide where you want to be. Sometimes it’s difficult to put in the time and thought process necessary to establish a path to excellence. This is especially true if you’re a complex organization focused on supporting the expectations of others around procurement – every day.

At this point, partnering with a procurement advisory service can guide your team to achieve procurement excellence and help you achieve your corporate goals: increase profitability, improve service outcomes that enable revenue growth, build customer satisfaction, and ensure that your suppliers deliver high-quality goods and services. It can help contribute to coverage). service.

Current environmental assessment

One of the most important steps is to review the procurement department’s mission and current role within the organization. A solid assessment examines the overall procurement life cycle.

How does procurement match stakeholder needs with suppliers that can provide the right capabilities? How do you organize your team around your key goals?

How do you provide services in the following areas?

Business planning, stakeholder contact
Sourcing Operations and Analysis
Supplier Performance Management and Compliance
Purchasing operations, including request processing and other critical activities

High-performing organizations regularly provide information to senior management to demonstrate the value of procurement to the business. Do you provide the following reporting?

Percentage of preferred supplier usage through category and organizational perspectives Sourcing efficiency, planned events on schedule, savings achieved and new supplier highlights for new key deals
Summary, supplier performance metrics including top 10 performers (plus bottom performers)

future state design

Based on the results of your procurement function assessment, achievable goals can provide a roadmap for the future. Procurement advisors help bridge the gap and typically develop plans to advance category management, develop target operating models, and capture other key opportunities to mobilize action.

At IBM, with more than 13,000 suppliers in more than 170 countries, this was no easy task. Using Design Thinking, among other methodologies, the procurement team was able to define a vision for the future state and scale effective solutions. By transforming procurement through intelligent workflows, procurement professionals can onboard suppliers 10x faster and perform pricing analysis in 10 minutes compared to 2 days. AI, automation, blockchain, etc. have made change possible.

In fact, a growing number of procurement organizations are considering incorporating generative AI as part of their future plans to drive faster, more accurate decisions, lower operating costs, and improve resilience.

The importance of the supplier ecosystem

Suppliers are one of the most important elements of your business, so it’s important to work together in this area. A preferred supplier program with well-negotiated contracts and pricing is aligned with key business strategies and can enhance the delivery of goods and services and, most importantly, improve customer satisfaction.

A thorough review of the entire supplier ecosystem, from supplier selection, source-to-pay to benchmarking pricing, can provide valuable insight into the maturity of the ecosystem. Measuring compliance is an important KPI for accountability. Are your internal stakeholders following your policy, or are you going outside the system? Are your suppliers meeting contractual requirements, service levels and sustainability goals?

Improved stakeholder satisfaction

Many companies closely track their Net Promoter Score (NPS) for both positive and negative trends. Even in the B2B space, customers demand that transactions be intuitive, easily implemented, and within corporate policies. In many ways, an optimized procurement function can lay the foundation for high-quality, on-time delivery of goods and services that exceed expectations and improve NPS by 30 to 50 percent.

In addition to external stakeholders, it is also important for procurement teams to build and maintain internal relationships. This will not only help you gather requirements, but it will also help build trust throughout the organization. “A model that encourages close interaction withCategory experts (who often want to handle their own procurement) can help manage sourcing, contracting, and measuring success while maintaining visibility, accountability, and spending discipline.