Structuring Procurement – devolved doesn’t have to mean ‘out of control’

Last week, we launched our new briefing paper titled “Centralise or Devolve Procurement – Why Not Both”?  It is sponsored by Comensura, and  is now available for download, free on registration here.

Our first blog about it drew some interesting comments, and the whole question of how to structure the procurement function, both in terms of the pure procurement staff and of how the function relates to stakeholders, is an absolute perennial favourite for discussion. Indeed, it was one of the major topics that came up at ProcureCon Indirect last week.

The feeling from that discussion was that there is a clear lifecycle for procurement structures in terms of their maturity. Where procurement is in its infancy, it tends by definition to be dispersed and devolved. At some point, more gets centralised, and procurement seeks to acquire power for itself, in order to deliver what are often relatively easy ‘low hanging fruit’ type benefits.

But once a certain degree of maturity is reached, procurement then starts to devolve a certain amount of activity and responsibility to dispersed procurement folk, or to users and budget holders. And more than one person at ProcureCon mentioned how technology could be an enabler to that more devolved approach.

Music to our ears, as that is pretty much the message in our paper. Technology is enabling procurement to consider more subtle organisational and control models, whereby budget holders can have considerable responsibility, and even a certain amount of freedom in commercial decision making, yet procurement can keep control of what really matters through the data, information and control that the technology can provide.  Here’s another extract from  the paper. And don’t forget to download the whole thing here – free on registration.

“The second development that is changing in terms of this debate is the advance of technology, which is giving us the opportunity to change the balance and combine the advantages of centralised and de-centralised models. So this is the crux of the matter, and a key point of this briefing paper  - the realisation that ‘devolved’ does not necessarily mean out of control, and  ‘decentralised’ doesn’t necessarily mean unstructured. 

The result is that organisations are moving to what we might term a blended or ‘tight/loose’ approach. There is scope for procurement to retain control of key decisions whilst letting go of other activities. That might mean handling some spend areas in a very centralised, controlled manner, whilst letting others be handled very locally or by non-procurement people. It means procurement keeping control of key elements of the procurement strategy and process, whilst devolving day-to-day operations within the category.

We see this as a major and growing trend in terms of procurement strategies in leading organisations. To get to grips with this, we need to consider what really matters to procurement and indeed to the business. For example, procurement may be relaxed about the user’s specific choice of supplier – as long as all the potential options are approved, acceptable contracts are in place, and the pricing is fixed or based on an agreed benchmark.”

First Voice

  1. Alun@MarketDojo:

    Technology is amazing. What is fascinating is the low cost to implement products with these capabilities over a company operating on the world stage. SaaS products very much lean towards this ability to retain control in certain areas while releasing control in others. No longer are you constrained to software installed on the local network. The control over what suppliers are in the system is particularly interesting with some companies allowing sourcing to retain an open hand on supplier involvement whereas keeping the approved supplier database within the ERP system tight.

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