Webinar Notes: Designing a Procurement Transformation Program for Best-in-Class Performance

This week’s featured webinar was a joint effort between ISM, Zycus, and Ardent Partners. It was presented in advance of a two part research series that will be published later this month. The research was “designed to help procurement organizations develop a transformation "blueprint" — a holistic view of the source-to-settle process and the underlying architecture required to support sustainable business process improvement.” (ISM event description).

Of all the points in the event, the one that gave me the most food for thought is the idea of short v. long term focus and vision. We all know the importance of ‘quick wins’ in proving a business case and winning over skeptics. But without a dominant long-term vision, procurement teams may become mired in repeated short term cycles that never allow them to make an impact or wield influence beyond the traditional role of procurement.

Procurement transformation is an appealing idea, but actually pulling one off may require different skills and preparation than CPO’s expect. Real, successful transformations represent change that is driven from within procurement itself, and are not based on disproportionately high hopes from technology. While it is not the sole focus of a transformational effort, automation is a key component. When considering the entire source-to-settle process, any solution (or solution combination) will need to work across departmental boundaries.

Getting started requires procurement to have visibility into both spend and processes. The transformation plan needs to include steps to engage the rest of the company, because if there is no adoption there are no results. Any transformation strategy needs to be unique and fitted to that procurement department and organization. Efficiency, savings, and spend under management may all be affected through transformation, but the time scope is just as important (if not more so) than performance metrics. Short-term gains are important but it is important not to allow plans to be limited by them. Both current AND future spend management goals should be addressed.

Putting the right plan in place also requires an accurate understanding of procurement’s as-is state. Understanding the current state as well as organizational requirements and priorities will aid in designing a successful transformation. For instance, is funding available or will the effort need to be self-funded through savings? Is talent available or is this an issue? What are the primary goals of the organization – improved product/component quality or diversification of the supply chain for risk mitigation? Those priorities should be used to prioritize the sourcing efforts of the procurement team as well as all of their downstream activities such as contracts, catalogs, supplier performance management etc.

Three common paths for procurement transformations shared by Ardent Partners are based on procurement’s starting point.

Greenfield – Everything is ‘low hanging fruit’ but nothing has been invested in either people or resources. Procurement is not engaged with the rest of the enterprise and there is little or no automation. Even internal stakeholders don’t know what to expect because they may have no prior experience with a highly functioning procurement group. There is so much work to be done that prioritization becomes the key rather than project identification.

Stalled – In this scenario, a transformation was started but didn’t get beyond the development of a vision and perhaps the installation of solutions. The next steps are more nuanced because procurement has to stage a recovery. Stalled teams will have something different to prove to the rest of the organization, and different obstacles to overcome. For instance, ‘How will this time be different?’ Remember to be careful about casting blame as some of the original players may be involved in a transformational re-launch.

Slow – A transformation was begun, with some successes, but the department lacks cohesion. It is important to assess if the selected solutions/automation address the needs of the entire source-to-settle process, as they may be the root of the lack of cohesion. Procurement leaders will need to draft a better, more sophisticated communication plan that helps engagement between all of the involved groups: procurement, finance, suppliers, internal stakeholders, solution providers.

Watch Ardent Partners' blog, CPO Rising, for more information on procurement transformation and the upcoming research report.