The highly dynamic economic environment and strong global headwinds are resulting in an increasingly challenging operational environment for organizations. To continue to endure and grow in this landscape, businesses must operate at the highest possible levels of efficiency – with procurement excellence and supply chain optimization being critical contributors.
The challenge though, is understanding what true procurement excellence is: what does it look like in practice, and how can it be achieved?
When procurement is appropriately positioned with all its building blocks optimized, it plays a crucial part in helping businesses achieve operational and commercial excellence, causing a fundamental shift in value generated and its perception. Procurement should no longer be viewed as a purely transactional function, but instead seen as a strategic function that helps businesses to look forward, increase value from and protect the supply chain, and create agile strategies that enable organizations to remain resilient and future-ready.
In many organizations, procurement has already made great strides towards being positioned as that strategic function, but in others this transition is yet to be realized. And for them to keep up with the increasing complexity of supply markets and changing business drivers, they will need to rapidly accelerate their procurement development – while those that have already realized the transition focus on getting better.
True procurement excellence requires a holistic assessment of what is working well and what needs to be improved, plus a defined, prioritized approach to addressing the gaps across several key building blocks.
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Focused strategy and a clear vision
A clear strategy and vision are the first steps on the journey to procurement excellence and will define how the other building blocks fit together. Procurement excellence isn’t something that will just happen or develop by itself over time. It requires commitment and a defined path that lays out exactly where the function is heading and its future responsibilities, in line with the goals of the wider organization.
To establish a strategy to achieve procurement excellence, there are a number of factors that need to be considered. First, there must be an understanding of what this excellence will look like for the business. Different organizations will use the same building blocks to get there, but they will also have their own risks, challenges, and ambitions for the function that need to be identified so they can define the right objectives.
Second, the evolving role of procurement needs to be understood and supported across the business. Key stakeholders need to have a unified understanding of the definition of procurement excellence – and how it applies not only to the procurement function but to their departments as well – to ensure all parties are aligned on what needs to be achieved.
And finally, the strategy and vision need to be built to allow for flexibility and continuous improvement. Goals and objectives should be regularly reviewed and updated, not only when they are achieved but to factor in external impacts that might affect procurement’s responsibilities going forward.
Ultimately, the strategy and vision need to outline everything that is required for procurement to meet, and continue meeting, the evolving needs of the organization.
Procurement is only as excellent as its people
Procurement excellence can’t be achieved without the right capacity and capability. As the role of procurement becomes increasingly strategic, it is necessary to have professionals who can think and operate strategically and effectively to execute the desired plans and drive true value generation (beyond pure cost reduction) in line with wider organizational goals.
However, amid the ongoing talent shortage and the continued need to manage cost, there is a growing requirement to do more with less. For this to be achievable, the procurement function needs to define a flexible, future-fit team set up with the right internal-external mix and the right skills. This means creating a diverse team of professionals, from different backgrounds and with different skills, who can bring different perspectives to the table and offer innovative solutions and better, more collaborative decision making through business partnering. Additionally, businesses need to ensure they have the right capacity – whether internal, external, or a mix of both – by assessing the procurement objectives and workload, which has become considerably larger over the past few years. To ensure they have the right capability to achieve procurement excellence, organizations need to invest in ongoing training and development programs to help their teams upskill and stay on top of changing trends and practices.
The right processes to achieve success
Once the team, vision, and strategy are set, the right processes need to be put in place to make the vision a reality. These structures, workflows, tools, and resources need to be flexible enough to adapt to changing demands. Ensuring that the procurement set-up and capacity and capability are flexible and agile enough to respond to external developments will be key to driving future success.
To achieve this, businesses need to minimize any waste and redundancies in the processes and focus solely on “value outputs”. They must identify any unnecessary steps or inefficiencies in the process that could be slowing down progress, or decreasing the value of the end product, and eliminate them – working towards a process designed to produce the greatest possible value for the end user.
This relates to any and all aspects of procurement, including governance, sourcing, planning and project management, supplier and contract management, business partnering and engagement, change management, and ESG and risk management.
By committing to continual process improvements and waste reduction, the clear vision and focused team can further help maximize the value delivered to stakeholders and better position themselves to meet the challenges of the future.
Procurement excellence supported by technology and data
For all of these building blocks to be successfully implemented, it is crucial to have a solid set of enablers from a technology and data perspective. This means having a clear understanding of the current state of the organization’s technology and data capabilities, identifying best practices and approaches, and setting up the right infrastructure to support the delivery of the strategy in the most effective and efficient manner possible.
One of the key enablers is having the right hardware and software infrastructure to support the organization’s goals. This includes having the appropriate servers, storage, systems, applications, security, and connectivity to support the business processes. The technology should be user-friendly, scalable, and capable of integrating with other systems in the organization.
Businesses also need to ensure the technology they use grants visibility over the data – both internally and from suppliers – to allow it to be analyzed and used to unlock insights and drive further organizational strategies. Data on supplier performance, spending, contracts, process cycle times, sustainability metrics, and other aspects of procurement can all be used to identify opportunities for cost savings, additional value, and refined processes.
The underlying technology should support and strengthen the other building blocks of procurement excellence, helping to further drive the company’s success.
Preparing for procurement of the future
Procurement of the future will not be what it once was or even is today. Its purpose, shape, and structure will continue to evolve and, alongside this, the enabling tools and processes will be subject to continuous change.
Procurement will be a critical enabler for value delivery and risk management, with cost improvement only one piece of the puzzle. For organizations to keep afloat in this changing world it has become a simple choice. Either plan and prepare to be on the front foot with a holistic approach to drive procurement excellence or play catch up and be left behind.
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