Procurement transformation is often the greatest single driver of sustainable and implementable savings for companies. Yet these programs, by their very nature, often can disrupt aspects of business activity while changing procurement’s overall role and structure under the broader functional and enterprise umbrella. No company should enter a procurement transformation without realizing that such programs will nearly always result in:
- material turnover of key staff
- potential turf battles with line of business holders
- ongoing technology and process change
- the potential highlighting of past areas of neglect and poor organizational performance, to name a few.
Given these anticipated changes, no company should enter a procurement transformation lightly. Yet organizations that require the type of procurement transformation activity necessary to treat their underlying purchasing maladies typically present similar symptoms. If your company has five or more of the following symptoms then chances are it could take great advantage of a transformation effort, despite the potential disruption involved in such an endeavor. Here is our list of twelve symptoms:
- Reverse auctions have become a strategy and not just a tool or tactic in a broader sourcing program.
- Your organization doesn’t track, on a total cost and budget impact basis, the implemented results of its sourcing efforts.
- Leadership and management can’t articulate the value of each of the solution components in a source-to-pay process (regardless of whether the organization has end-to-end capabilities in place – or not) .
- Your company has no or highly limited supplier management and supplier risk management resources in place.
- Key categories are sourced once without ongoing cost reduction or supplier development strategies other than the rebidding out of contracts prior to expiration.
- Suppliers are passing along price increases and you can’t tell them whether they’re justified or not.
- Compliance requests to the business are falling on deaf ears and continued offenders are not changing their behavior.
- There is a known internal skills challenge.
- Beyond just staffing deficiencies, procurement leadership has an inability to bring in the right resources for the job (e.g., can’t justify or get headcount despite the savings incremental resources can bring).
- Management does not take procurement as seriously, on a comparative basis, as sales or IT, nor does it get a seat at the table.
- Procurement does not have a collaborative relationship with line of business owners, finance, IT or HR.
- Procurement has not been able to pursue high-value, high-risks spend categories (e.g., for indirect/services: accounting/audit or legal; or, in the cast of direct materials, moving beyond fasteners and forgings to components, assemblies and more complicated make/buy decisions has proved difficult).
If you answered yes to five or more of these questions, then a procurement transformation is certainly something to consider.