Guest article by Simon Appleyard and Gerry Bolton, independent consultants in the Finance, Procurement and Shared Services sectors.
This 3-part series takes you through the stages of how to get the most out of your Procurement function. In this final part, we focus on driving change in your procurement.
Having enabled change within the business through greater use of digital technologies, thoughts must then turn to the capabilities of the Procurement team to carry out more strategic activities. Procurement functions often bring in external expertise to try to achieve quick wins, for example, through a sourcing review or a tail-spend program but seldom focus on building the true business relationships that will offer sustained value.
To operate in a more effective manner this needs to be addressed and those working in Procurement driven to engage more actively with operational business teams. After all, it is difficult to promote new solutions or ideas if you don’t understand how those ideas might impact the teams that would use them.
The embracing of digital technology is relatively easy once the structures are in place. The cultural change however requires a change in mind-set that may require fresh thinking within both Finance and Procurement. Procurement should be viewed in a different way, by members of the team themselves and by the wider organization. They should strive to be seen as enablers of business change.
How to approach the culture change
- Establishing a culture where Procurement clearly understands the strategic direction of the business is key. This allows greater alignment with vendors and suppliers at the earliest stage. Communications are key and regular strategic briefings around core business aims can help the team understand what they should be looking for when dealing with third parties.
- Set targets for Procurement that relate not just to operational costs or targeted savings in the buying function, but which measure the value added in terms of propositions brought forward by Procurement following discussions with suppliers. This will take time but will help create a culture where there is an active desire to seek out new capabilities and understand what value they could bring to the business.
- Undertake an end-to-end process review of Procurement and Source-to-Pay. You’ll be surprised at the efficiencies that can be brought out which can then free up staff. Consider aligning the process under a single management structure. Don’t be afraid to break down traditional barriers about what should be in Procurement and what should be in Finance. A closer relationship between Procurement and Finance will be critical to success.
- Engage with supplier self-service. It is as much in the interests of your suppliers as it is for your organization - if suppliers can access the information they need without having to contact you then it is ‘win-win’. If they can then then use technology to electronically interact and engage with you then all the better.
- Have a clear distinction in place between strategic vendors and ‘run of the mill’ Procurement. You need to show you are actively managing the former, whilst the latter should follow standard processes that are clearly defined.
Game-changing opportunities exist for progressive businesses that embrace the movement of Procurement to a strategic level. The combination of improved analytics, intuitive and timely digital access for all stakeholders, lower sourcing costs, and more strategic supplier relationships present the Procurement function in all sizes of organisation with an opportunity to positively impact the performance of the business. Those Procurement functions that can most effectively seize the opportunities to lead rather than follow are those that will be considered successful in the future.