Much has been said about transformation, as a concept, process and journey. Of late, the term is heavily employed among sourcing and procurement organizations. We are launching a series of blogs to address the major considerations for transforming a sourcing / procurement organization including: Process, Technology, Procedures and People. We will explore the critical-to-success factors to true transformation.
As a caveat: Don’t be misled, “Transformation” does not equate to “doing more with less people”. Rather it refers to fundamental changes in the WAY a sourcing / procurement function operates.
At the very foundation of any organization are it’s people and the talent, or lack thereof. There was a recent article written by AT Kearney that summarized the talent gap in the sourcing and procurement. (add brief summary of article)
What is the root cause of the talent chasm among sourcing / procurement organizations? You see, these organizations are lagging. Typically, these back-office functions and operations are last to INVEST in hiring the best and brightest. From my experience, these organizations do not have or exercise succession planning or an active program for training professionals for the future. The focus is on traditional metrics (cost savings). As a result, they are anchors to the business because; BUSINESS understands that one needs to INVEST before reaping a benefit. Absence of a proactive approach to understanding the direction of the industry and a strategic plan to remain relevant are at the heart of the chasm.
While AT Kearny was correct in their conclusions related to sourcing and procurement talent, the first step would be to hire strategic leadership that understands the future and can build a foundation of talent AND a repeatable process for managing departmental talent in the future.
Like any organizational transformation, the task of assessing processes is not trivial. It is particularly difficult IF you have not, already, established a forward-thinking team. For the purpose of this discussion, let’s assume the “People” transformation has been completed.
At the heart of most sourcing & procurement organizations is category management: The alignment of the organization to various products and services. By way of example, many organizations have categories aligned to their major lines of spend: Marketing, Consulting, IT, Hardware, Software, Services, etc. with a category lead at the head, responsible for the strategic direction of the category. While this is a, historically, sensible approach from the sourcing and procurement perspective, many lose sight to the customer perspective. Category leads establish engagement methods specific to their category. For example, the software category may require clients to log into a software-specific portal, while services may engage via the eProcurement platform.
Customer centricity is at the heart of the process. A transformed sourcing and procurement organization is characterized by a simplified purchasing experience: one in which customers experience a single point of entry. This is accomplished by streamlining the process* starting with digitization of the customer experience and replacing manual intervention, non-value-added activities with automation.
*Process mapping can be daunting. However, the strategic leader knows there are automated tools in the market that drastically reduce the time to generate current state process maps.
Policy & Procedures
Few would argue the importance of policy and procedures related to the engagement of third-party for services or for the procurement of the goods required to support the business. This only becomes a detriment when policy and procedures are onerous and do not align with the business strategy. From experience, sourcing and procurement organizations are handicapped by rigidity characterized by an inability to flex to business requirements. This situation can be exacerbated when delegation of authority to deviate from policy is not established by leadership.
Transformation, in this context, would start with an exercise to align policy and procedures with business goals. For example, if the business values speed-to-market, policies and procedures should offer a fast track to contracting and securing funding for external spend. Additionally, exception processing (granting) should be established at the proper organizational level for the process to remain nimble.
From experience, transformation would start with a clearly defined service catalog that defines the services provided to the business, accountability, delivery metrics and associated cost.
Recently, at Ariba Live a Fortune 50 company presented an innovative technology integration of Ariba Guided Buying module in conjunction with robotic process automation (RPA). The project as designed to improve customer buying experience and streamline the sourcing process by leveraging procurement robots to create and process regulatory and compliance due diligence documentation. This is an illustration of transformation within the sourcing and procurement realm.
Another, significant, trend in sourcing and procurement transformation resides in data analytics. Data drives category strategies, buying channels and almost every process within the space. A properly architected data analytics platform and staff provides invaluable intelligence to the “deal makers”. Predictive analytics, for example, can be leveraged to anticipate and take action upon, for example, expiring purchase orders and contracts. The ability to utilize key internal and external data sources to proactively engage stakeholders and suppliers is invaluable.