Spend Matters welcomes this guest post by Ben Hinge, of GEP.
Imagine just for a minute that the following is true: You are part of a large, complex organization with a successful history and a bright future. There are plans in place to develop a mature procurement organization that will align with the greater organizational goals, while delivering significant value to the organization year over year. Fantastic leadership is in place in (or is being put in place for) the procurement team, and there are large savings targets for the coming years. Now, the question becomes: Is the organization ready for procurement and its goals? Let’s take a look at some key enablers that can make all the difference for procurement’s long-term success.
We’ve already touched on it slightly above, but the people who make up a procurement organization are critical. Day in and day out, strategic procurement professionals are called upon to solve complex problems involving multiple stakeholders who each have individual (and independent) goals. The skillset required to flourish in this role goes far beyond simple analytical capabilities. Consider also the communication skills of the individuals in question, remembering that there will often be a requirement to communicate effectively across multiple geographies and hierarchical levels. For maturing procurement organizations, it’s especially important that the team fosters an environment of teamwork and mutual benefit with business stakeholders. The most mature organizations may even tie such accomplishments to performance management, rather than proceeding with simple savings targets.
To maximize the impact of a mature procurement organization, there is a requirement for strong processes both in procurement and in other business areas. From the procurement side, it’s important that there are clear paths to engage business stakeholders (i.e., ensure that there is at least one procurement liaison in each business unit/function), run P2P operations and track/monitor both savings and contract compliance. The absence of these processes can create confusion leading to mistakes and potential additional expense. External to procurement, it’s important to ensure that the business has appropriate practices in place to enable efficient procurement involvement. To use one example, for any internally-developed direct materials, it is important that the business maintains a database of all design specifications. Any changes in design should be documented and stored, preferably in a system that procurement has access to, so that when the time comes to test the market, the information is readily available. Unfortunately, this is not always the case.
As organizations mature and expand in size, technology can serve multiple functions, from the seemingly simple (such as spend analysis), to the increasingly complex (e.g., online sourcing events, including reverse auctions). Procurement should develop a close working relationship with both accounts payable and IT in order to maximize the effectiveness of their technology suite(s), as both can provide valuable inputs. Procurement technology can also serve as a useful extension of the procurement team by providing a controlled way to purchase small-value items such as office supplies through the use of online catalogs, which can be linked to purchasing cards, thereby reducing transactional costs.
Here we’ve explored some of the very basic enablers that can becomes keys to the success of a maturing procurement organization. As an organization develops and becomes increasingly sophisticated it is important that organizational leaders continue to search for these improvements to ensure that they are delivering that best value possible to the organization at large.
For more imaginative thinking on procurement software, visit the GEP Knowledge Bank.