Procurement Transformation:
The time is now

The growing pressure on procurement

It is no longer business as usual for procurement. Within just the first weeks of the new year, businesses have already faced unprecedented change and disruption from geo-political uncertainty and macro-economic pressures. This whilst organisations are still struggling to cope with the effect of COVID-19 on staff absences, material shortages and the increasing need to be more environmentally sustainable. The impact of these disruptions has highlighted just how interconnected and vulnerable links in the supply chain are, and it has emphasised the true value of procurement to its organisation.

These extreme pressures on the supply chain have forced procurement functions to confront the limitations of their business-as-usual approaches and driven them to adapt. Procurement leaders have quickly recognised that the key to success is developing a plan for turning these disruptors into opportunities to grow and gain competitive advantage. The overall strategic importance of procurement has therefore increased significantly over the last 2 years. All eyes are now on the procurement function, not only to secure goods/services, but increasingly to support business longevity and add value to the organisation.

Business in 2022 is operating in a complex, uncertain and constantly changing context. Whilst economic growth of 4% is expected, business confidence is growing and organisations are developing their own version of a ‘new normal’, one thing is certain…more change is yet to come.

Why procurement transformation is needed now

Board members are increasingly aware of how fundamental supply chains are to business continuity and risk management. However, a recent study revealed that 91% of global businesses simply cannot stay ahead of their supply chain complexities. As procurement functions have been forced to become much more flexible and responsive in recent years, it has prompted executives globally to re-evaluate their entire supply chain operations. It is becoming clear that this disruption to the status quo has created a real catalyst for change and a need for effective procurement transformation.

The shift in priority from tactical ‘keeping the business running’ at the beginning of the pandemic, to longer term strategic objectives in 2022 is causing much uncertainty within the procurement function. Whilst incremental change is nothing new, and procurement professionals have had to stay ahead of emerging technologies and new business practices for years, this type of radical change has stretched even the highest-performing procurement teams. It is therefore critical that business objectives for the year ahead are carefully prioritised to enable gradual and sustained procurement improvements.

By transforming its procurement capabilities and further enhancing the strategic nature of the function, organisations will be much better equipped for developing their competitive advantage. The challenge is in maintaining this strategic focus, not only in the wake of recent global and economic pressures, but for years to come.

The procurement transformation journey

Transforming the supply base and challenging what has been done in the past is crucial for unlocking the potential for step-change impact. According to our research, almost half of firms globally will overhaul their entire procurement and supply chain strategies in the next 12 months, however 63% of executives (from the 400 organisations questioned) do not believe that they are equipped for implementing a supply chain transformation programme.

Many organisations are only just beginning their procurement journey. Often, they have small internal procurement functions – or none at all, with hundreds or even thousands of individuals across the business responsible for ‘buying’ goods and services. This is especially so in professional services businesses such as law firms, recruitment companies and rapidly growing financial service organisations. Similarly, there are also instances where often well-known global brands don’t have an effective internal approach to procurement.

And whilst transforming supply chain activities, in whichever form they are currently carried out, may seem like a waste of money, enhancing procurement capabilities can unlock huge financial savings very rapidly. Procurement is a long-established value lever in many industries, delivering substantial bottom-line P&L impact. Although inflationary pressures will see the focus in coming moths shift from cost reduction to cost avoidance, effective procurement can deliver significant value-add benefits through efficiency improvements, staff upskilling and reduced operational risk. 

5 simple steps for transforming your procurement function

Procurement transformation is a journey which is unique to each organisation. Whether you are just starting this journey or have a number of procurement initiatives already underway, here are 5 simple steps to help you effectively transformation and enhance your procurement function:

procurement journey chart 

Understand where you are now

Organisations differ greatly in their procurement maturity – some are starting to gradually improve the function whilst others have been on the journey for many years. Understanding where you are now is vital for ensuring targeted and lasting change. We typically suggest that you measure and assess your level of maturity against the 8 Key Procurement Enablers:

Identify your target

In order to enable improvement, you must understand your desired goals. For example, are you seeking to achieve ‘Excellence’ in Sustainable Procurement or is ‘Professional’ level more realistic, and most importantly – what are your timeframes? Implementing a new digital procurement tool within the next 12 months might be your number one priority, so it is important to carefully identify and define your procurement targets.

Understand your gaps

Once you have a clear understanding of your current maturity level and your desired target level, you can easily identify the biggest gaps and therefore the largest opportunities. This will ensure that you focus your team’s efforts on the highest impact areas which will drive the most significant improvements.

Create a roadmap

You can’t do everything all at once. Identify your key focus areas and prioritise them based on the biggest ‘wins’ or the most urgent pain points. A tailored transformation roadmap provides the means for executing your procurement strategy in the most time efficient way possible.

Measure the progress

Continue to measure your progress and regularly re-assess your level of procurement maturity to demonstrate the improvements. Maintaining a clear view of the success of your procurement transformation programme is vital for ensuring stakeholder buy-in and sustaining business momentum.

It is increasingly clear that procurement change is both inevitable and necessary.  Procurement transformation is required now, transformation that is supported by clear analysis and goals to achieve success. Following the initial uncertainty, it is now time for procurement teams to refocus, look ahead with caution and openness to the opportunities that can be realised in the year ahead.

To find out more about how Procura can help your business please contact us.

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