Procurement transformation is a journey to find the “best fit”

The vision is the key of the successful procurement transformation. I often hear the CPOs building the vision of the transformation is to be the industry benchmark in the next years. Is this a right vision? The answer is no. The reason is simple that you don’t need to be best of best in everything in order to deliver the value back to the organization. In the end of day, most procurement organizations are the supporting function of the majority companies. The vision of procurement transformation has to be built on the value. The value is not only focus on the traditional cost saving from the deals but also on the boosting the company revenue, culture and digitalization. These value levers need to continually deliver back to the company during the journey not by end of journey. The best vision according my experience has to be built on:

Know the “best fit”

The “best fit” does not mean you have to be the best. It is worth to have the full assessments conducted before you making your wishes. Many originations start the journey with the new technologies. In many cases, the people blame on the tool we are having is not the best. But the success of procurement technologies are also based on who and how to use it. By saying that, there are two assessments need to be done which are internal current states landscape and external benchmarking. After this exercise, it is clear that what your strength are and what your weakness are. It really help you make your investment wisely. The more you invest in on the weakness the more you will see the return.

Back to the basic

The basic of procurement is often ignored by the leaders. Comparing AI, RPA or big data, it is not that fancy working on the basics. However, it is the foundation of all these fancy things. You will be surprised when you are closely looking over the process, the taxonomy and the supplier on-boarding forms. I learned one of greatest company does not have the fancy procurement tools but have the most detailed process and procedure. It works very efficient and productive. On the another hand, before you are looking for new cost saving opportunities, you may find that company benefits more from stopping the leakage from current contract savings

Know your people

The transformation has to be top down which means that it is critical you have the senior management team buy in and support on the 5 year vision. However, the senior management team is not enough for the success or the transformation. You need understand who are your stake holders and what their business strategies in the coming years . This brings the most challenging part called change management. Knowing your team is also important as well. The benchmark of the procurement operation cost is ~10% of the company addressable spend that procurement manages.

The last and the most important is commitment on the transformation. The vision you created has to be realistic and achievable in the next 5 years. The value has to be recognized by the leadership and continually delivered back to the compa