Transforming a Procurement function by fixing the organizational chart first…… never works! /// Stéphane Morel

Too often, Procurement transformations follow a ready-to-fail pattern:

1. Begin with a quick audit and create a generic vision using buzzwords.
2. Outline specific jobs and their high-level activities or accountabilities to achieve the vision.
3. RUN inti defining organizational charts and number of FTEs based on spending/savings, and sometimes using the number of suppliers, contracts, or purchase orders.
4. After a few months, confusion arises as people struggle to understand roles and who takes care of the overlapping activities; they wonder who in the function talk to who in the business.

Some parts of the organization can start their own sub-transformation reinventing steps 1-4. We can even reach the frustration level: we have the ones leaving, the ones who stay taking over the job from the ones who left (without any knowledge transfer), the new ones onboarding and wondering how everything works.

Luckily, we can be involved or drive a much more effective approach

These are key steps when transforming a Procurement function

Strategy

• Conduct a deep function maturity audit.
• Gather input from business, customers, and suppliers. 
• Establish a realistic and compelling vision with a 2-3 years’ roadmap.

People

• Invest time in understanding the organization’s individuals, including roles, maturity levels, behaviors, culture, and talents. 
• Identify competency gaps against the vision.

Pipeline

• Analyze in detail spending, suppliers, purchasing orders.
• Segment categories to define the most effective way of managing them (kind of Kraljic analysis).
• Perform savings pipeline analysis, and check the existing rules for savings calculations. 
• Determine the need for category management Vs. strategic sourcing.

Operating model

• Audit processes, methodologies, and tools to assess performance in areas like transactional / tactical / strategic Procurement, legal, supply chain mgmt., and supplier quality mgmt.
• Fully agree on definitions within the leadership team of the key processes, activities (inputs/outputs), methodologies and roles.
• Learn more in Stéphanes’s blogpost about Operating models.

=> ONLY THEN YOU SHOULD DEFINE THE APPROPRIATE ORG. CHART!

Change Management & Business Partnering

• Through Change Mgmt., define how to communicate, engage and energize all the people who will make the journey real.
• When required, through business partnering , set up actions to get closer, engage, align, agree, deliver with the business.

Following these steps can make a significant positive impact.

What are your transformation plans & steps?

Any tips?

Contact Stéphane Morel at LinkedIn

and discuss Transforming a Procurement function.

Learn more about Procurement management

Building and Transforming a Procurement function

The agenda of a CPO (Chief Procurement Officer) and key management processes in a Procurement department. How to convert the company strategy to a procurement strategy, content of a procurement strategy, category management and more are available in Learn How to Source’s Procurement Management Program. 

The basic level course package aims to provide learners with a comprehensive understanding of the responsibilities typically on the agenda of a Chief Procurement Officer (CPO). You will find courses as:

• The Operation Strategy Matrix, developed by Professor Nigel Slack, offers an in-depth perspective on organizational strategies. Crucially, it illustrates how these strategies can be distilled into specific procurement strategies. This alignment is pivotal to ensure the procurement department’s activities are in sync with the overarching goals of the company.
• While there’s no one-size-fits-all approach to structuring a procurement function, various factors such as the nature of the business, its history, available resources, and other variables dictate how roles and resources should be organized. Despite this variability, LHTS believes that showcasing a generic, contemporary blueprint of a procurement organization – detailing roles and responsibilities – can be instrumental. Such a structure not only helps budding procurement professionals understand their function but also highlights the potential challenges a CPO might face. An optimized procurement function is often the cornerstone of a company’s success, ensuring quality, cost-effectiveness, and reliability within the supply chain. While every company must tailor its procurement function to its unique needs, this general blueprint provides a robust foundation to comprehend the core elements and their efficient integration.
• Competence management emerges as a pivotal strategic area within the procurement function. When executed adeptly, it ensures access to pertinent skills and can also amplify a company’s appeal as an employer.
• Additionally, the package introduces learners to Sourcing Key Performance Indicators (KPIs), which are critical metrics every procurement department should monitor. Participants will gain insights into tracking and interpreting these KPIs to guarantee peak performance.
• EFFSO sheds light on the concept of category management (CM) and offers guidance on establishing an effective category management program. The follow-up course navigates learners through the initial steps of CM implementation, providing an exhaustive overview of CM and the essential components for an initial category strategy, complete with handy checklists.
• The program also delves into Value management, focusing on deriving additional value from the supplier base. It provides a deep dive into the techniques and tools employed to maximize this value and transforming a Procurement function’s way of generating value.
• Why is Corporate Social Responsibility (CSR) pivotal for the procurement community? The course explores the significance of responsible business practices and how they mark the initial steps towards sculpting a sustainable supply chain.
• Discussing digitalization, the course underscores the integration of proactive digital procedures within the procurement domain. Successful digital transformation can unleash a plethora of benefits including enhanced efficiency, transparency, cost savings, revenue generation, agility, and supply chain management improvements. Various technologies are available to bolster this digital metamorphosis:
• Spend Visibility Analysis Tools: These tools proffer insights into organizational spending, promoting informed decision-making.
• Blockchain for Smart Contracts: With blockchain, contracts can be verified, executed, and stored securely without third-party intervention. Robotic Process Automation (RPA) Technology: This tech employs “robots” or software to automate mundane tasks, freeing up human resources for value-add activities. Procure to Pay System: These systems mechanize the process from ordering to payment, culminating in swift, efficient transactions.In this module, Medius toolkit is exemplified to demonstrate how standard processes can undergo digitization. By grasping and leveraging these digital tools and methodologies, companies can not only streamline their procurement procedures but also remain competitive in an increasingly digital landscape.
• The procurement department’s role isn’t just about sourcing goods and services. They must ensure these meet the organization’s quality, cost, and delivery criteria. But beyond these basic requisites, procurement professionals must weigh the ethical and societal ramifications of their purchasing choices. This is where the ‘Supplier Code of Conduct’ assumes significance. This code demarcates the principles and expectations an organization sets for its suppliers, encompassing ethical work conditions, environmental stewardship, human rights, and other relevant societal facets. It’s imperative for procurement professionals to be cognizant of and understand these facets to make informed decisions that align with the organization’s broader objectives and ethos.
• Concluding the course, we offer a personalized 1-on-1 e-meeting (60 minutes) with a course instructor. This session’s objective is to translate the theoretical insights from the online lectures into practical application in real-world professional settings, among other things… transforming a Procurement function.

About Learn How to Source

Learn How to Source (LHTS) does not only provide blogpost as Transforming a Procurement function. It is an online platform based in Sweden, offering a range of procurement courses accessible globally. LHTS serves as a community where procurement experts share their knowledge through online courses, designed for various experience levels from introductory to expert. Courses are concise, about 30 minutes each, and cover different aspects of procurement, tailored for different buyer roles and complemented with blogposts, like this one about Transforming a Procurement function. The courses focus on practical knowledge, presented by seasoned professionals, and include quizzes and certificates. They can be accessed from any device, emphasizing microlearning for flexibility and efficiency.

Note: Illustration to blogpost “Transforming a Procurement function” is created by Stéphane Morel.