Procurement Transformation. Why?

A quick look through history reveals that transformation goes into overdrive during economic downturn. The current dire economic situation is forcing businesses to rethink their existing operating structure, and look beyond traditional measures so as to address challenges to business in an innovative way. Businesses have realized that the potential of procurement transformation is not just limited to the traditional cost arbitrage, but effective management of overall spend, which can in turn directly contribute to the bottom line.

The Value of Transformation

Many businesses today are realizing that procurement transformation is a key enabler in achieving corporate objectives. For many organizations, procurement is at the top of today’s corporate agenda, with the role of the Chief Procurement Officer changing from operational to a more strategic focus. As a result, procurement becomes a key enabler in achieving corporate objectives in today’s challenging business environment.

It is important for businesses to assess the procurement function in a holistic manner. Have a framework in place outlining the procurement processes, strategic direction and key procurement enablers to guide you. Such dimensions are essential for the successful execution of any procurement transformation program for purposes of achieving procurement excellence. A winning transformation strategy requires a standardized approach that allows for effective project management, efficient realization of deliverables, and ensuring that quicker results are achieved. This approach should be flexible enough to ensure that the expectations and requirements of the client are easily adopted.

The procurement strategy is at the heart of procurement excellence and should be aligned with the corporate objectives and strategy. This entails having well defined processes that comprise the operational side of procurement, including payment of invoices and managing suppliers and contracts. Key enabling factors are also necessary for the successful designing and operation of the procurement strategy, as well as to support operational procurement processes.

Transforming for Success

Procurement transformation enables businesses to identify opportunities, realize savings targets, design tax efficient procurement structures, as well as optimize operational procurement processes. All this is achieved while ensuring ongoing risk and cost management through effective supplier and contract management.

An effective transformation strategy will entail identifying various savings opportunities and improvement initiatives so as to deliver considerable savings and professionalize procurement. A business needs to implement an optimal procurement target operating model that includes reporting lines, governance structure, KPI dashboard, detailed roles and responsibilities. Indirect saving opportunities must also be analyzed and prioritized so as to achieve realistic sustainable savings.