KPMG: Exploring Procurement Operating Models- The Symbiotic Relationship of Changing Structures and Savings

This analysis is based on the KPMG and Procurement Leaders research study: High Impact Procurement Operating Models – A Survey of Global CPOs. Readers can download the full analysis (warning: it is dense!) by clicking the previous link.

Two of the key takeaways in KPMG’s and Procurement Leader’s research have a unique, symbiotic relationship with each other given the typical non-incremental savings path most organizations realize in their procurement transformation journey (e.g., achieving significant results, at least on paper, for a given set of category or sourcing initiatives and then realizing diminishing results before moving onto something else). These two takeaways are as follows:

“The procurement journey. Most organizations begin with a decentralized model, and centralize as the function matures. There are indications of a second phase of decentralizing as an organization evolves to a center-led model. Significantly, despite these phases, the benefits of past models are retained in the current.”

Procurement Operating Models (POMs) do not deliver savings, but changing the model does. We found that the change in itself delivered sustained impact, as the savings and value generated by current models are equivalent. There is no endpoint for either POMs or companies, but rather a continuing search for value.

In other words, it’s not merely the act of moving to a given approach that achieves the benefits – it’s moving away from a previous model by trying something new. This concept really is quite novel considering so many procurement transformation efforts are predicated on top-down type of organizational structure and process type changes – rather than bottoms-up efforts. But if we’re to believe that it is change itself that drives results, shouldn’t we look as much as we can to the change agents themselves (i.e., team members) rather than the architects (e.g., consultants, executives, etc.) to drive savings?

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