Exploring Procurement Operating Models: Moving Beyond an Identity Crisis and Gatekeeper Role

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.

Is procurement suffering an identity crisis as it transitions to becoming a centralized function inside companies (in a similar manner to HR, finance, IT, and other areas)? The authors of the above-linked KPMG and Procurement Leaders study examining procurement operating models suggest that given the continuously evolving state of the function inside many companies, “its identity and role changing frequently.” This might lead to an identity crisis of sorts in certain situations. But does it?

One of the biggest challenges we observe as procurement attempts to become more strategic across expanded areas of buying (e.g., supplier on-boarding, compliance, contract management) is balancing the right level of oversight and control with stakeholder empowerment and enablement. For example, if procurement is working with specialists to drive supplier diversity, how can it best serve as an enabler while enforcing some basic requirements in the on-boarding and supplier management process (including reducing exposure to supply risk)?

Decentralization can have benefits in such a case (e.g., an independent supplier diversity function). But as organizations move to a centralized model, they do not necessarily have to give up these advantages of flexibility and decentralization. As such, “the outcome of companies progressing through their procurement journey resembles a steady accumulation of capabilities, as opposed to a trade-off between alternative models. As companies progress from decentralized to more centralized structures, they do not lose the benefits of being decentralized (such as stakeholder proximity and responsiveness).”

As procurement becomes more centralized, Spend Matters believes that it is critical to move beyond a common definition / label of procurement as gatekeeper. Rather, in an idealized centralized capacity, procurement must become the function that provisions services and capability (e.g., market information, labor, technology) for the broader organization across as many spend areas as possible. Call procurement an “intelligent router” as in IT networking that determines where and how best to “send the packets,” and you would not be far off in terms of this future operating model.

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