Procurement Transformation is based on strategy, and focused on organization, processes, and technology, on a foundation of governance and guiding principles:
- These components are measured by:
- Efficiency
- Effectiveness
- Customer Service
Procurement Strategy is concerned with identifying, selecting and implementing the right procurement structures, systems, skills, processes, programs, shared values, initiatives and objectives fthat adds significantly to its goals and profitability. In essence, procurement strategy drives the building blocks for procurement capability.
Procurement Governance encompasses control and direction for an organization’s procurement function via a framework of formal structures, mandates, policies, operating procedures, delegations and decision rights.
To optimize value, procurement professionals need to augment procurement governance with an effective Procurement Organization. Although governance provides procurement legitimate authority and decision rights, much of what Procurement needs to do to be successful can only be achieved through designing an efficient organizational structure and managing the organizational interface. Whether the structure is centralized or center-led, distributed, or hybrid, the degree to which procurement can achieve its mission, strategies, and objectives are dependent on the mix and caliber of its personnel and the environment in which they operate. Consequently, establishing the right environment regarding roles, tasks performed, motivation, training, career development, and reward and recognition becomes critical to the provision of an effective, efficient, and customer focused procurement function.
Similar to any other corporate function or business activity, Procurement Processes are a foundational building block for procurement. Keeping things simple, discussions on procurement processes almost always reference back to the two macro end-to-end processes of Source-to-Contract and Procure-to-Pay.
Procurement Technology is a great enabler for procurement capability and value. Technology can sustain the sourcing strategy, speed up and simplify routine procurement transactions, and lower the cost of information acquisition, analysis, and dissemination. Procurement technology ranges from market intelligence tools and eAuctions for strategic sourcing to an electronic transaction platform for the creation and transmission of procure-to-pay documents. Integrating an organization’s source-to-contract process through an end-to-end system and utilizing an ERP system to integrate and automate the procure-to-pay process must be a high priority.
If an organization builds its procurement improvement efforts around these Guiding Principles, it can develop a simple and practical design to improve procurement capability and enable effectiveness, efficiency and customer service.
