More than ever before, procurement organizations are playing a strategic role: collaborating with other areas of the business, influencing product and service development, and supplying data that informs high-level decision-making.
But this transformation cannot happen without substantial changes to daily operations. What steps must procurement organizations take to get operations right? Our surveys of over 1,000 procurement professionals outline some of the ways companies are – or should be – adapting to the function’s new stature. We’ve distilled that wisdom into five key action points, summarized in the acronym ADAPT – Assess, Declare, Automate, Partner, Technologize.
A – Assess
New ways of working demand new ways of measuring value. The transformed procurement function is positioned to contribute to the business in ways that go beyond traditional cost savings, from increasing customer satisfaction to enhancing brand value. Our surveys show that many companies have some catching up to do when it comes to their use of key performance indicators, with relatively few organizations tracking things like the number of suppliers with automated collaboration or touchless transactions.
D – Declare
Clarity around goals and progress is vital to procurement earning a seat at the table – and even the most up-to-date suite of KPIs is meaningless without the right processes in place to achieve and report on those metrics. But only half of executives and practitioners say their company tracks performance of products and services developed by the procurement function, and even fewer use methods like conducting stakeholder satisfaction surveys or reporting on project-level results. Says Tim Thomas, former head of procurement at JBS, the big meatpacking company, “It’s necessary to put your successes and your failures up in lights to let everybody know what’s going on, and the value that you are adding.”
A – Automate
Automation of procurement processes is freeing practitioners from non-strategic tasks, with over half saying the automation of spend analysis and operational procurement are saving them time and increasing efficiency. Executives and practitioners may not always see eye-to-eye on how mature the automation of various processes will be in two years – executives tend to be more optimistic than practitioners – but its value as an enabler of more strategic work is clear.
P – Partner
When asked where they would like their organization to be most focused in two years, working one-on-one with suppliers in a strategic way is most important to executives. This new level of integration of suppliers into internal processes is changing day-to-day operations within the procurement function, according to nearly two-thirds of executives. Tools such as integrated supplier networks and increased mobility will be necessary to facilitating these innovative, collaborative partnerships.
T – Technologize
New and maturing technologies such as the Internet of Things (IoT), as well as B2B commerce networks and familiar collaboration and communication platforms, are changing day-to-day work for practitioners – a trend that is expected to increase over the next two years. To truly become strategic, procurement functions must retool around these new operational procedures and strategic endeavors.
The transformation of the procurement function is ongoing. Today’s operational processes will not fit tomorrow’s business, and companies must continuously adjust to new ways of working to keep up. As the chief procurement officer for one large, US financial services company told us, “I have the long-term view that these operational changes are going to help us dramatically.”
The Oxford Economics Future of Procurement research program includes surveys of more than 1,000 procurement executives and employees around the world, along with personal interviews with leaders in the field. Learn more about the project and download an executive overview here.