More South African organisations are starting to recognise the value that procurement transformation initiatives bring to the bottom line. Successful procurement transformation projects reposition the source-to-pay process for success, across the entire organisation. The entire source-to-pay process is made efficient and highly collaborative, providing organisations with a competitive advantage.
Procurement transformation can be defined as a process – with an element of flexibility – in which an organisation’s capability and procurement behaviour is altered to attain desired results (such as the achievement of maximum value through the procurement function) and attain long-term sustainability.
Supply Chain Partner, a specialist supply chain service provider, discusses 9 critical success factors (or pitfalls if not considered…) that can make or break your procurement transformation success, in this month’s SmartProcurement.
1. Have a business case
How many projects fail because they lose track of what they are trying to achieve?
• Develop a business case approved by stakeholders and/or sponsors
• Keep referring back to the business case when the scope, stakeholders and/or sponsors change
2. Assess internal skills and capabilities required to achieve the business case
Understand the business case and assess current internal skills and capabilities against the required outcome. You don’t necessarily need consultants to run the entire procurement transformation project, but here are some areas where they are valuable:
• Support with external best practices comparisons
• Change leadership support for sponsors and middle management
• Subject matter experience, where organisations lack capacity in terms of technology, business and people
• Support where temporary resources are required, owing full-time employee constraints
Additionally, one of the greatest benefits to provide to a customer is external support, to supplement internal capability in terms of category sourcing efforts. In many instances, your entire procurement transformation project can be funded by providing a competitive bidding platform, combined with deep-skilled resources.
3. Active visible leadership and sponsorship
Essential for any project to remain sustainable is active visible leadership and sponsorship:
• Senior executives should provide active and visible leadership and support in the wider organisation
• In order to influence the transformation successfully, sponsors should be educated, coached and supported by change management resources, to clearly understand their roles and responsibilities
• Procurement also requires active and visible leaders for change, and to build a coalition of sponsors
4. Establish an end-to-end process ownership
Regardless of the organisational model — decentralised, centralised or hybrid — accountability and ownership of the source-to-pay process must be established. Typical governing expectations can be:
• KPI reporting and ownership across both purchasing and accounts payable
• Continuous updates to technology and process improvements to ensure end-to-end performance optimisation
• The process owner must be a good facilitator who can involve and align various entities and functional silos
5. Employ change leadership
This is the ability to lead an organisation through the full lifecycle of transformation. It is made up of critical elements such as:
• Change engineering: analysing and visualising the anticipated outcome from the outset
• Change management: a project-based discipline that manages and optimises the human behavioural side of the change execution process
• Change integration: change result becomes reality
6. Know your customers’ requirements
Too often procurement individuals are so focused on meeting financial targets, that internal customer requirements are neglected and the focus shifts from doing things to them instead of for them. The procurement department should engage with key customers regularly — with support from senior sponsors — to communicate and incorporate feedback from middle management.
7. Determine foundational mechanics required to achieve success
Source-to-pay execution relies heavily on the input of timely and accurate information. What are the mechanics that must be improved to optimise this outcome?
Some of the key aspects we have helped our clients to unpack have been:
• Does the procurement department have a clear and concise mandate that is shared by all functions, and aligned and supported by the overall company strategy?
• Which functions need an investment in new systems to improve accuracy and speed, so that procurement service level agreements can be met?
• Do policies, processes and procedures reflect efficient and effective procurement outcomes for internal and external parties?
• Does the procurement operating model support business objectives?
• Do the procurement personnel have the right amount of resources, optimal skill set, clearly defined job descriptions and capability expectations?
• How do you sustain this capability when the consultants leave? How can you ensure that your own team has the necessary skills to sustain and exceed the transformation objectives?
• Which risks should be managed closely and with great visibility?
8. Consider what other world-class organisations are prioritising
Once you have understood your own environment, look outside your organisation to see what other world-class organisations prioritise.
Top initiatives include the following:
• Enable better decision-making by improving the visibility of information for your internal and external customers
• Increase your end-to-end procurement efficiencies by assessing the following key aspects:
business strategy alignment, process improvement, behavioural change and technology optimisation
Detailed functional areas to review include:
• How are business requirements defined?
• Source-to-pay automation (includes strategic and tactical sourcing)
• Contract lifecycle management automation (easy access to workflow, supplier performance monitoring, risk management, inflation management of price adjustments and supplier relationship management)
• Standardisation of master data and content management
• End-to-end process integration across the entire supply chain environment
• Cost benchmarking, engineering and simplification
• Understand and mitigate supply chain risks across all functions within the organisation
• Integrate and empower the procurement function
9. Once you get going, identify, execute and communicate quick wins
Quick wins are an easy way to gain support and buy-in. Reverse auctions – also referred to as competitive bids – are great tools that can gain support quickly as they generate measurable benefits immediately. These auctions can range from very simple, to incredibly complicated and assistance of experienced professionals may come in handy at first.
Adapted from Supply Chain Partner
