What do you think “Procurement Transformation” means?

- November 14, 2012 1:33 PM
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For a number of reasons, I’ve been thinking recently about “Procurement Transformation”.  It is an expression we’re seeing used more and more – it’s not new, but it seems to be gathering pace and attention. If you Google it, for instance, you get 3,570,000 results! Most of those seem to be from management consulting firms, although I confess I haven’t looked at the entire selection.

No, I said "Transformation"!

There’s also a thoughtful piece (as always) from David Atkinson in the current Supply Management, looking at why transformation often doesn’t deliver. But before we get into those debates, the two fundamental questions would seem to be:

1. What exactly does procurement transformation mean?

2.  Is it something that does have a substantive meaning (like “category management” perhaps), or is it pure jargon or fluff?

So the first step is defining it. Google to the rescue again. Here’s one we found:

“…a project that fundamentally alters the capability to improve the achievements or results”

But is that right? Because altering the capability to improve is not the same as actually achieving improvement in terms of end results, which (I would suggest) seems like a core aspect of transformation.  The definition above would cover the situation where I may have a more capable team – but we don’t deliver better results because of the stakeholder environment and lack of good data. that can’t be transformation.

What about this, from Denali Group:

“A holistic approach to improving all aspects of a procurement operation for improved results and long term sustainability”.

Better, maybe, but still… do I have to improve ALL aspects of the procurement operation? Every single one? That seems  little too strenuous perhaps. And isn’t “improvement” sort of what we do all the time anyway? It feels like transformation needs to have more change or urgency about it somehow. So here is another consulting firm, Nitor.

“A cultural shift that will look to change the behaviors of an organization in the acquisition of suppliers, goods and services with the scalable infrastructure in place to ensure maximum value“.

Getting closer perhaps?  Although I wonder whether the “scalable infrastructure” bit is quite so fundamental that it needs to be in the one-sentence definition.

So, before we move onto question two, and whether transformation really is a significant topic, any more thoughts on the definition?

Comments

  • Dan:

    Procurement Transformation, like any other bit of jargon, simply means whatever we want it to mean.

    Cynic? Moi?

  • Ian Heptinstall:

    A transformation is just a marked change. It doesnt necessarily mean for the better. When used in “Procurement Transformation” does it not imply that the organistaion using the term is either (i) trying to catch up to Good Practice at a rapid rate, or (ii) is doing things never done before…which only hindsight will show whether they are better-than-good or not…..

    Procurement organisations shouldnt in my view need transforming often. If they are it implies they are getting something fundamentally wrong.

    On the other hand, changing things for the better, should be a core part of the job of most people in procurement, rather than some initiative. Some of the issues highlighted in David A’s article are far too common, and our professional toolkit should include methods to avoid them.

  • Derek Lancaster:

    I’d agree with Ian’s comment that change is a core part of everyone in Procurement’s job, though in my experience that’s often focussed on changing the category area for which they are responsible – ie it’s about ‘front-line’ change.

    For the Procurement department itself to change requires the commitment of dedicated resource in some form. Category Management has been around for a couple of decades, but it’s only now that the recession’s really biting that organisations (especially in the public sector) are getting to grips with it, often through a specific transformation initiative. So how about this attempt at a definition…

    Procurement transformation is a structured programme with a clear vision aimed at introducing and embedding excellence in professional practice to help the wider organisation deliver greater value through its contracts with suppliers.

    Maybe a bit jargony I know – but, hey, it’s what I do!!

  • bitter and twisted:

    The meaningful use of “Procurement Transformation” is purchasing changing from order jockeys to a real function. Other uses are just bs for we done it bit betterer.

  • RJ:

    I’m not exactly famed for being succinct so I won’t try a one-sentence definition. However, I disagree with Ian above. “Transformation” or “step change”, while being horrendous over-used jargon is a necessary part of any business process’s evolution and, I would argue, is something that all organisations should be looking at on a 5-10 year cycle.

    Although it’s not all been as fast or straightforward as we might have wanted, in 20 years (+) in Procurement, our role has clearly “transformed” and is almost unrecognisable from when I started out. Technology has driven some of this (e-auctions and ERP systems, spend analysis, the availability of market data, P-cards…), legislation has changed (OJEU, Sarbox, the Bribery Act…), organisational structures have evolved (outsourcing and shared services, centralisation/decentralisation…), markets have altered (globalisation, new media, Eastern Europe, South America and Asian powerhouses…) and even fresh thinking (SRM, Lean/6 Sigma…) has contributed to this. I therefore don’t think you can say that “Procurement organisations shouldn’t need transforming very often” – if they don’t then the world will leave them behind.

    In many respects, continuous improvement is the way in which we respond to immediate changes but there comes a point in any organisation where the law of diminishing returns applies and a more radical change is needed in order to stay ahead of your competition (or your supply markets). Such “transformation” initiatives don’t always work, and I have been through and even led some that haven’t, but the fact that Procurement’s role has changed so much says to me that plenty have succeeded.

    Having to go through “transformation” needn’t necessarily imply that you are “getting something fundamentally wrong”, it might just mean that you need to respond to what others are doing or stay one step ahead and you cannot achieve that within the current constraints (technical, skills or organisational) of your existing set-up.

  • steve:

    Having led a few improvements, evolutions, and transformations.. I reserve “transformation ” for when it is organisation-wide change. That is, not just an improvement within a purchasing function, but reviewing the whole way in which an organisation relates to its suppliers. That should be good news for the purchasing function, as it often results in clarifying and valuing the role of the buyers. But in practice, does the organisation see the existing procurement team as part of the solution, or part of the problem?

  • eSourcingSensei:

    “Transformation” by its very nature should be something more than a change – to change something can mean to take something blue and make it green – its the same item but a different colour.

    To transform something surely means to radically alter that item into something that is totally new and often unrecognisable as the original item although it may still retain some core elements – so in Procurement those core elements may be the people.

    I have been involved in a number of transformation projects – often as the person that is meant to be being transformed. So very often within 2 years of the suposed transformation taking place the organisation reverts back to its original practices leaving the supposed radical improvements back on somebodys drawing board

    I firmly believe we need to embrace new technology and new practise that help Procurement deliver on its very basic role – to deliver a supply base for our stakeholders that is of the right quality delivering to the right time at the very best total cost to the organisation.

    Think of this. A drug addict who moves away from heroine and is placed on methadone is still a drug addict – changed but not transformed. The drug addict who is one day taking heroine and the next is completly drug free and non dependant on the heroine or any other drug is really “transformed” – and if you think Im talkking rubbish I know this has happened!

    So all of the tools, new processes (5 6 7 8 10 step methodologies) we have available, and that will be designed and introduced in the future, do and will, I am sure, provide huge change in the way Procurement goes about it’s business – but what is it that would truly “tranform” the roles we perform.

    We go thorugh much change in Procurement but I have yet to see anything that “transforms” and so I would question if anything in Procurement is really “transformational”.

    Sensei

  • life:

    “Procurement Transformation” in commercial use is clearly intended to summon something of the nature of a caterpillar bursting into a butterfly, and obviously some people do find it convincing enough to rush to their wallets otherwise it wouldn’t be used, I guess. As pointed out above though it’s ultimately unreliable as it talks to capability rather than efficacy.

    Somewhat like another classic puff phrase: “celebrating our diversity” – summoning images akin to one of those big paintings of a busy and studiously diverse park in council foyers – which like a stopped clock must be representative of an actual park somewhere in the world at least every now and then, but can’t be relied upon as an accurate guide.

  • bitter and twisted:

    Eureka!

    “Transformation” = Redundancies

  • Dan:

    I rest my case….

  • Alison Smith:

    For me procurement transformation has to be about a step change in the process of procurement across the whole organisation. Any programme that purely focuses on transforming the procurement team and its activities will never achieve the objectives most organisations would have for such a change programme. As David said its about mindsets being changed – for me its essential that also includes the mindsets of those of the procurement function’s stakeholders.

    Perhaps a little twee but Procurement transformation can only succeed when ‘we’ is used routinely rather than ‘us & them’.

  • PlanBee:

    Procurement Transformation for me would result in a step change in the performance (and perception) of the Procurement Function.

    Cost Transformation is considering the total cost picture and totally changing the way you look at it. Concentrate on the outcomes. Eg we want to have really succesful meetings between UK and US employees. Using teleconferences, Video conferences, Skype etc rather than flying would be a cost transformation. And yes it often means redundancies too.

  • Three high-level principles for Procurement Transformation — Spend Matters UK/Europe:

    [...] asked a couple of weeks back – just what is procurement [...]

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