Transformation is currently the number one topic of conversation for procurement. Organisations are transforming in increasing numbers. Procurement Leaders’ latest survey found that 82% of respondents are currently undergoing a transformation. Back in 2014, just one-third of companies were doing so.
Buyers must grow accustomed to change for the foreseeable future.
Transforming the procurement function is a difficult, expensive process, and not something that just happens overnight. Many a seasoned buyer will eye the next wave of structural changes with jaded scepticism.
As with any change there are costs to be considered, including both operational cost and political capital.
Procurement Leaders research finds that it takes around two and a half years for a function to complete a transformation. During this time, one-third of available work-hours are consumed with the programme. The purchasing function as well as other departments and business units will also see their work disrupted. In the short-term, a transformation means high operational costs and loss of productivity.
In terms of political capital, the leadership team will be accountable for the transformation and will often face cynics, both inside and outside the function, who will be opposed to the change. The cry of “that’s not how we have done it before” will empower resistance. As such, CPOs need to build change management processes into their transformation in order to ensure success.
To overcome resistance, there are four key steps procurement should take to drive forward organisational transformation.
1) Ensure you understand the business
Every procurement project must be aligned with the business needs. Yet, this is often the first area of difficulty for buyers. Buyers are traditionally used to working in silos, rimmed by a high wall of policies and restrictions. This clashes with the needs of the business in which buyers should be more innovative and procurement have a greater understanding of the objectives of its stakeholders. By taking this first step, buyers can ensure that procurement transforms into a strategic partner.
2) Obtain the right technologies
The ERP space is replete with new technologies and offerings; relying on old systems is no longer an option. Aged architecture and incompatible systems will not be tolerable for businesses that are minted on the currency of information. Procurement has a real opportunity to place itself as the hub of data-flows from both the supply chain and from the wider business. This demands that the function bravely tackles its own patchy technological landscape.
3) Get your suppliers on board
The skills of the future procurement function hinge on building partnerships, not just with internal stakeholders but also external suppliers. Forging collaborative alliances with third parties will be central to the skillset of every buyer. Tapping into the expertise of suppliers, either by unlocking ideas or improving a working relationship, may develop a competitive edge for the entire organisation.
4) Superpower category management
For many, category management brings with it depleted savings. But strategic category management is not only a tool to consolidate spend for beating up suppliers with volume. Rather, it is a means to collectively understand an organisation’s need in key areas of spend and manage that need in an intelligent manner. Using category management in the future will be a major means to drive value for the entire business and place procurement at the heart of that.
At Procurement Leaders, we see many companies invest heavily into accelerating their transformation. These investments are not best spent on novel managerial philosophies, but trusted and tested procurement tools. However, transformation success depends on how buyers embrace these tools and use them to drive the business forward.
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