How immature is your procurement function?

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Heleen_Liebenberg.pngIn recent years, how did your supply chain evolve to address the significant political and economic pressures of today’s age?

Heleen Liebenberg, Senior Consultant at Volition Consulting Services, wonders if you are able to meet the ever increasing demands placed on procurement performance, in this month’s SmartProcurement.

Unfortunately and despite the pressures to improve the performance of the procurement function, some Chief Procurement Officers still seem content if their organisations simply manage to deliver value through cost savings.

Within the procurement function, there is a wide range of external factors that directly affect organisational performance, including, but not limited to:

  • Customers
  • Policy
  • Staff
  • Processes and procedures
  • Vendors
  • Tools
  • The organisational environment

Regardless of whether the external factors are enabling or inhibiting, the procurement function must deliver value (usually in the form of cost savings); enhance vendor performance; enforce compliance; maximise operational performance; mitigate legal and operational risk; and simultaneously achieve broader corporate themes and objectives.

Assessing the maturity of your procurement function

Establishing and recognising the current maturity of your procurement function in terms of its ability to satisfy imminent requirements will enable you to take the necessary action(s) in order to achieve continues value improvement.

There are generalisations that represent certain attributes or characteristics of the procurement function in relation to the various maturity levels.

Maturity_Assessment.jpgThese generalisations are described by maturity level in the illustration alongside:

The maturity assessment typically considers procurement across the following dimensions:
  • Strategic planning and objectives
  • Organisation design
  • Strategic sourcing and category management
  • Buying operations (procurement)
  • Supplier management
  • Contract management
  • Risk and governance management
  • Performance management
  • Knowledge / information management
  • Organisational capability (skills)

Evolvement of the procurement function

Research and experience with client engagements has shown that Chief Procurement Officers typically assist their organisations to evolve and become more mature through five major stages:

Stage 1: Supply assurance
Tactical/operational procurement at site level, ordering and expediting.

Stage 2: Purchase cost reduction
Purchase cost reduction through negotiations.

Stage 3: Reducing the total cost of ownership (TCO)
Application of TCO models, supplier and market analysis, supplier management and supplier relationship management, supply planning, project and risk management.

Stage 4: Demand management
Financial management, internal customer relationship management, influence on demand and specifications.

Stage 5: Value management
Harnessing the power of supply markets for competitive advantage and increasing business value derived from spend opposed to only reducing spend magnitude.

Real change occurs when the procurement and supply chain function as a whole shifts from being supply-centric to placing emphasis on internal and external customers.

In order to achieve real value through stage 5 there needs to be synergy between the agendas of the Chief Procurement Officer, the Chief Financial Officer and the Chief Executive Officer, focusing on issues such as growth and sustainability.

It also requires a shift away from the traditional manner in which the procurement function is run to a manner similar to a management consulting business - applying customer relationship management practices internally and constructing supply management services that serve the budget owners rather than procurement.

Benefits of assessing the current maturity of your procurement function

  • Provides a cross-disciplinary perspective of your procurement performance.
  • Identifies key factors that affect your procurement performance.
  • Identifies areas for improvement and provides a clear view of how to reach the next maturity level from a holistic point of view.

So, how mature is your procurement function?

Join Volition on 15 November 2012 for the Maturity Assessment Workshop at the 2012 Smart Procurement World Conference and Expo to gain insights and a high-level overview on the maturity of your current procurement function. To register email delegates@smartprocurement.co.za or visit www.smartprocurementworld.com

You are alternatively welcome to join Volition for two other workshops on 15 November 2012 entitled: How to Source Logistics Providers? or Contract Management for Government.

Contact Heleen Liebenberg, Senior Consultant at Volition Consulting Serives, at hliebenberg@volition.co.za

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