Procurement Transformation Beyond Cost Savings

After years of steady incremental improvements, many global procurement functions are seeking to achieve a step-change in overall enterprise impact. While the procurement function has long been the champion of cost management and savings, with the rising maturity of savings initiatives and increasing focus on business agility, procurement functions are moving to drive greater impact by creating favorable business outcomes.

True procurement transformation is a fundamental shift in the underlying philosophy and operational model of a procurement operation, aiming to create an efficient, high-powered function that is well aligned to strategic corporate goals. A transformed and maximized procurement organization can positively impact cost savings, of course, but also support growth, new business development, regulatory compliance, and risk mitigation.

But procurement transformation is fraught with real challenges and potential dangers.

First, many procurement functions will have to address initial challenges to set the stage for effective transformation, including inefficient organizational structures, obsolete processes, expertise gaps, and stakeholder management issues, among others.

The next step in procurement transformation is identifying and engaging the levers of procurement transformation. Successful transformation depends on pulling the right levers at the right time; engaging the wrong levers, or the right levers in the wrong order, can exacerbate existing problems, or even create new challenges.

Essential procurement function transformation levers include:

• Develop an effective procurement strategy
• Inspect and revamp the procurement process chain
• Leverage technology, big data, and analytics
• Empower suppliers
• Plan for change management
• Track outcomes and monitor progress

There are examples of organizations that have successfully transformed their procurement functions, and are now realizing beneficial impacts on service delivery, innovation, and profits. Achieving these results, however, requires a good plan, strong leadership, and more than a little patience.

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Note: Read Everest Group’s complimentary report, Procurement Transformation – Driving Performance & Results Beyond the Limits of Leverage.