“Centralise or Devolve Procurement? Why Not Both?” How Technology is Enabling New Operating Models

Last week Spend Matters UK published Peter Smith’s paper Centralise or devolve procurement? Why not both?”

We’ve seen many years of debate over the best way to organise procurement within complex organisations. And the question of whether it is better to centralise or decentralise, hold or devolve power, is still one of the most heated talking points among procurement executives. Now, technology has evolved to a level that means we may no longer need to choose between one or the other, or indeed try to make both models fit where an organisation has a siloed, category-led structure in place.

As organisations start to limp out of budget-straitened times, it’s time for procurement leaders to rethink their strategy and let go of old hang-ups: that devolving means less control, and decentralising means less structure. This paper was written to put those misconceptions to rest. It concentrates on explaining the diverse models in use and how technology can be used to keep control firmly in the hands of the procurement manager, regardless of who owns the process.

“Procurement can, via technology, retain access to the levers that enable the function to deliver value to the organisation. Control over key contractual conditions, access to spend information and data, and visibility of supplier performance can be maintained (or enhanced) from procurement’s point of view …”

Peter is a dyed-in-the-wool procurement expert. His many years in the industry and within various functions have given him first-hand insight into the dilemmas facing CPOs. How to structure the procurement organisation? What are the best models? Whether to invest and in which technology?  Should the procurement function be centralised or decentralised? Should procurement seek to maximise and retain power within the function or devolve it to internal stakeholders? In his paper, supported by Comensura — with expertise in contingent labour supply management and whose management systems are used widely across various sectors — Peter breaks down the myths surrounding procurement devolution and explains why matching structure with organisational aims is key.

The paper looks at the models in use, particularly the Centre Led Action Network (CLAN) and Strategically Controlled Action Network (SCAN) and discusses when they are, or are not, the best fit for an organisation. “… structures and operating models need to be carefully chosen and specific to each organisation – and even for different spend categories.”

It goes on to explore how technology can “provide tools to ensure that users work in the right way, without close control from procurement … to ensure good value is delivered to the organisation.” Peter ends the paper with a brief look at an example of an enabling technology that helps “procurement to take what we have termed a ‘tight/loose’ approach to spend management.”

The paper is a valuable tool for the senior procurement executive or CPO wishing to gain a better understanding of the pros and cons of centralised or devolved procurement methods. It can be downloaded for free here.

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