How important is procurement to your organization?
What value do purchases bring to the table? I’m not talking about the need to buy goods and services, nor the collection of policies and SOPs that govern it. I mean you and your teammates. How important is your procurement team to the organization according to senior leaders?
Every procurement team is different, but they all fit somewhere on a continuum with these bookends:
They are either proactive, high-impact organizational leaders …
… Or responsive tactical followers that add a lot of process but little value.
So where is your procurement team located? Specifically, what can you do to build a better vision to help your team mature?
The maturity scale
First, let’s add a few points to our scale and define four stages of sourcing maturity:
Delay / Transactional. These teams are very responsive and focused on tactical purchases. They exist to ‘tick boxes’ and force stakeholders to overcome obstacles for the good of politics. Transactional teams generally have a net negative organizational impact.
Traditional / shared services. As teams mature, their perspective begins to broaden. The teams in this group are looking beyond the deal and starting to assess the market. However, they are often limited to thinking about three offers and one buy. The emphasis is on reducing unit costs and managing PO processes more than anything else.
Augmented management / supplier. Teams ultimately become proactive, value-added functions by engaging in strategic sourcing initiatives and focusing on spend visibility and opportunity assessment.
World class management / procurement. At the highest levels of maturity, procurement teams help guide supplier relationships in ways that move the organization forward. These teams have a seat at the decision-making table, helping senior leaders shape the direction or organization.
A team’s arrival depends in large part on the strength of its vision – the ability to chart a course that aligns with and follow organizational goals.
Move along the maturity ladder
How can immature teams climb that ladder to become world class? There is no checklist that guarantees that this will happen (and this kind of thinking is “lagging thinking”). However, there are several questions procurement needs to ask and answer along the way:
What metrics and reports do we deliver to the leaders of the organization? Beyond reporting, we need to make sure that we are developing information that defines and helps solve organizational challenges.
What tools and technologies do we have to enable us to operate effectively and efficiently? We cannot handle strategic work if we are bogged down in tactics.
How do we make sure our process has value? We need to design policy and SOPs in a way that benefits the organization without adding unnecessary bureaucracy to the equation.
How do we define our role beyond purchasing tasks? We need to understand where and how to help stakeholders achieve their goals – this often means going beyond helping them find the best price for a purchase.
Manage complexity and risk with Vision
Leading organizations keep an eye on the future. They are looking for ways to pivot and expand their products and services to keep up with demanding markets. This change often results in a more efficient and competent organization. However, growth also leads to complexity and risk. All teams must learn to manage this complexity – or risk hampering larger organizational goals. Sourcing is no different.
Jennifer Ulrich from Corcentric will be speaking at the ISM Annual World Conference in May on this topic. Her session explains how sourcing can build a vision to go beyond tactics. Three case studies demonstrate the challenges and solutions to achieve this that we have seen with our clients.
Need help getting your vision off the ground? Register today to attend.