How Important Is Procurement To Your Organization?

Procurement

What value does Procurement bring to the table? I don’t mean the need to buy goods and services, or the collection of policies and SOPs that govern it. I mean you and your teammates. How important would senior leaders say your Procurement Team is to the organization?

Every Procurement team is different, but they all fall somewhere on a continuum with these bookends:

  • They are either high-impact, proactive organizational leaders…
  • … Or reactive, tactical followers that add plenty of process but little value.

So, where does your Procurement team fall? More to the point, what can you do build a better vision to help your team mature?

The Maturity Scale

First, let’s add a couple points to our scale and define four stages of Procurement maturity:

  • Laggard/Transactional. These teams are highly reactive and focused on tactical purchasing. They exist to “check boxes” and have stakeholders jump through hoops for the sake of policy. Transactional teams generally have a net negative organizational impact.
  • Traditional/Shared Services. As teams mature, their view starts to expand. Teams in this group look beyond the transaction and start assessing the market. However, they’re often limited to three-bid-and-a-buy thinking. Focus is on reducing unit costs and managing PO processes more than anything else.
  • Augmented/Supplier Management. Teams eventually become proactive, value-adding functions by engaging in strategic sourcing initiatives and focusing on spend visibility and opportunity assessment.
  • World-Class/Supply Management. At the highest levels of maturity, Procurement teams help guide supplier relationships in a way that moved the organization forward. These teams have a seat at the decision-making table, helping senior leaders shape the direction or the organization.

Where a team lands is largely based on the strength of their vision – the ability to set a path forward that aligns with organizational goals and follow through on it.

Moving Along the Maturity Scale

How can immature teams move up this scale to become world-class? There’s no checklist that ensures this will happen (and that kind of thinking is “laggard thinking”). However, there are several questions Procurement must ask and answer along the way:

  • What metrics and reporting are we delivering to organizational leaders? Beyond churning out reports, we need to ensure we’re developing information that defines and helps solve for organizational challenges.
  • What tools and technology do we have at our disposal to enable us to operate efficiently and effectively? We can’t manage strategic work if we’re mired in the tactical.
  • How do we ensure our process has value? We need to design policy and SOP in a way that benefits the organization without adding unnecessary bureaucracy to the equation.
  • How do we define our role beyond buying tasks? We need to understand where and how to support stakeholders in achieving their goals – this often means moving beyond helping them find the best price for a purchase.

Managing Complexity & Risk with Vision

Leading organizations keep on eye on the future. They look for ways to pivot and expand their products and services to keep up with demanding markets. This change often results in a more efficient and capable organization. However, growth also leads to complexity and risk. All teams must learn to manage this complexity – or risk hampering greater organizational goals. Procurement is no different.

Jennifer Ulrich from Corcentric will be speaking at the ISM World Annual Conference in May on this topic. Her session covers how Procurement can build a vision to move beyond the tactical. Three case studies demonstrate the challenges and solutions for doing so that we’ve seen among our clients.

Need help getting your vision off the ground? Register today to attend.

This blog originally appeared on the Strategic Sourceror

Author:

Job Title: Advisory Consultant
Organization: Corcentric

A procurement advisory consultant who helps organizations perfect their strategic sourcing abilities, better manage supplier relationships, and refine their processes to clear away roadblocks.

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