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Designing the right procurement strategy

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All procurement teams are aware that they must deliver hard savings on an annual basis and so they engage with their stakeholders throughout the year in order to achieve that objective. However, not all procurement teams conduct a maturity assessment to identify whether they own the required capabilities to sustain the delivery of those benefits over time nor are they all aware if they have the organisational structure and processes that will allow them to maximise the benefits provided to the business.

 

In some businesses, procurement remains isolated from other functions and struggles to gain a seat at the table due to a lack of business partnering. They might be achieving savings, but not to the degree expected from the Board of Directors and not in all the business’ regions. Due to these limitations, it is important that procurement designs and implements an architecture that enables engagement with stakeholders and also enhances the management of suppliers. This will help procurement maximise any identified realised savings.

 

When designing procurement’s organisational structure and defining the processes, three main elements should be considered:

  1. The strategy the organisation has defined for the upcoming five years along with the organisational structure.
  2. The functional strategies defined by the rest of the business and which should be aligned to the overall strategy.
  3. The maturity and resources the procurement organisation has.

 

Any function of an organisation should ensure its strategy syncs up with that of the wider organisation.

 

Procurement should identify whether the organisation would benefit from a centralised structure to place decision-making at the heart of the business, or a decentralised structure which would empower every business units and regions to make decisions about products or services. For instance, Unilever has created complex networks between its headquarters and its subsidiaries due to the market strategy it follows. The consumer goods group has global brands but it customises some of them due to local needs and preferences. This scenario requires precise coordination and collaboration between its global centre and the business units.

 

As a second consideration, procurement should be aware of the different functional strategies across the business and possibly mirror their structures, in case it provides a better position to engage with stakeholders. Following the same structure as its clients might bring additional benefits and improve engagement with them.

 

Lastly, procurement will be able to identify the capabilities its team owns and determine which additional capabilities its people should master. Hence, it can achieve the compliance of the objectives and the delivery of the benefits stakeholders demand.

 

Building an organisational structure and processes, and taking these elements into consideration, will allow the function to develop the capabilities necessary to achieve the benefits expected by its clients, to develop and improve engagement with business partners, to participate in strategy definition and deployment, and to achieve better supplier management. This will help procurement on its way to contributing to the overall objectives and benefits of the organisation.

 

Rodrigo Sanchez has experience in strategy and operations management in both operational and commercial environments, and is now a consultant at GEP

 

This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.

Rodrigo Sanchez
Posted by Rodrigo Sanchez