Stop holding back: five common obstacles to transforming procurement
Change. It’s critical to staying ahead. Especially for the procurement function, which is so steeped in old habits and long-standing processes that it is slowing valuable progress. With so many disrupting factors, it’s difficult to know where to start transforming to a more modern way of working that brings value to the business.
Many organisations look to artificial intelligence or robotic process automation; but the challenge facing procurement is bigger than simply rolling out the latest digital trend. To really transform, procurement needs to start having much wider, more strategic conversations. To gain recognition at board level and deliver greater value, risk reduction and market insight that goes beyond simple cost savings. And alliances should be made across departments – particularly with finance and IT – to demonstrate the value of procurement and move beyond that of a simple transactional role.
It’s vital to get this right. Over half of CEOs say acting with agility is the new currency of business –- but almost 80 percent of CIOs also say their digital strategy is only moderately effective, or worse.
So what is stopping the function from evolving?
- The meaning of transformation is misunderstood.
Often, in digital projects, the right measurements and metrics are not in place up front; but this is a critical step in aligning viewpoints of what success looks like. For one role it could be increased efficiencies, for another, an improved customer experience.
It’s important to have a shared vision, with outcomes that everyone is clear on, and can stick to.
- Changes in politics and business must be reacted to.
New and changing regulatory pressures, global political change and uncertainty, and growing consumer expectation all make procurement more complex.
Not wanting to introduce new risk, it’s easy to sit still and avoid change, and focus instead on tightly managing the supply chain and keeping procurement costs to a minimum. But this is causing a lost opportunity. Change gives more reason than ever to adopt a more efficient and modern procurement approach that can navigate – and even profit – from disruption.
- Progress beyond the cloud.
Adopting a cloud platform is only the first step. How can you maximise your new and more flexible platform? What systems can you start migrating to the cloud? And are you using it to quickly spin up new services, processes or reporting possibilities?
Deploying cloud and then stopping at that is akin to doing nothing at all.
- Stop the digital skillset talent deficit.
Procurement might be missing the digital talent and skillsets needed to take the function forward with evolved technology, solutions, and processes.
Dedicated digital skillsets are required, and can be built by developing existing talent, or bringing in new specialists. With supply a challenge in the sector, consider incentives to encourage some staff to retrain where possible.
- Focus on the data.
Data. It’s often forgotten about, with poor data only discovered halfway through transformation – when it’s too late.
It’s vital that procurement understands where all their data comes from, and where it sits in the business – particularly given the myriad of data sources that come from working with a complex supply chain.
Cleaning that data before any big business change project is critical – and, as discussed in the previous point – the right role is required to do this. Define who is responsible for taking care of data; creating a new role for a data scientist or similar is critical so you can determine where the responsibility lies.
Start a more strategic conversation.
By addressing these five key areas, mapping out an end-to-end process change project, based on a pre-defined methodology and clear end-state, the procurement function can engage in more strategic conversations and bring more value across the business.
This goes beyond theory – it’s borne out in practice.
One example is a US-based risk management and insurance services company, which attempted to integrate its purchasing and accounts payable departments using a software solution.
When this failed to provide clarity, they turned to a cloud-based approach that resulted in improved oversight and standardised global processes, tripling the businesses spend under management (a key performance metric). Forty five percent of manual invoicing was transformed to e-invoicing. And 57 percent of users logged into the cloud solution within the first month of its launch.
Having the vision to transform is only the first step. The appropriate technology must be properly and flexibly implemented, with clear metrics for success and a steady hand upon the tiller. Only in this way can procurement be recognised as an effective function of the future that can run alongside the finance function, and IT.