Introduction
In a time of fast technology change and changing company dynamics, procurement transformation is essential. Companies are realising that inefficient, error-prone, and laborious procurement practices no longer match current business needs. Businesses must overhaul their buying methods to be competitive and resilient. This article discusses procurement transformation, its motivations, and how organisations may create a strategic roadmap for successful and sustainable change.
Transformation in procurement
Management has given procurement departments strategic responsibility, necessitating this change.
Procurement teams today drive value, achieve sustainable outcomes, and help firms stay competitive despite market upheavals and supply chain interruptions.
A procurement transformation roadmap
A procurement transformation roadmap details the steps, timelines, risk planning, communication and collaboration needs or changes, and resources (people or technology) needed to transform procurement and sell the final vision to leaders and procurement teams.
What’s procurement transformation strategy
A procurement strategy establishes a sustainable and adaptive plan to improve procurement procedures, efficiency, supplier relationships, and long-term cost savings for the firm.
4 trends necessitate procurement transformation
1. A major change in procurement teams
The biggest post-pandemic corporate change is teamwork. As more teams go remote-first, manual and analogue methods no longer function.
Discover how Ocean Network Express solved this problem and established clear communication between departments and accounts payable systems using Pipefy.
2. Changes in business needs and procurement
The changing corporate scenario requires procurement teams to do more than save money or run a tactical department. Procurement teams must now be strategic, value-creating business partners that boost corporate agility, financial visibility, process resilience, and competitiveness.
3. Lots of manual labour and fast-changing processes
B2B purchasers’ top five procurement concerns in 2022 were:
- Delivery reliability (43%).
- Spend policy compliance and rouge spending (40%)
- Complex purchase (31%).
- Complex approvals (29%).
- Time-consuming invoice reconciliation (28%).
Complex and disconnected procurement and finance processes cause many of these issues, highlighting the need to digitalise and automate purchasing and procure-to-pay processes with a software solution that provides management controls, automation, and data analytics for end-to-end supply chain and process data visibility.
4. IT and developer shortages persist
This tendency has long been simmering and has now boiled over. Sixty-four percent of IT executives consider the developing IT skills scarcity, anticipated to last at least a decade, as the biggest impediment to future technology adoption. IT skill retention is also threatened, complicating problems.
This skills scarcity and retention issue are even more concerning for complicated and ever-changing procurement procedures that require expert assistance to optimise or adapt.
5. A need for sourcing change
Supply chains and management have been under the focus since early 2020.
After layoffs, hiring freezes, shortages, and geopolitical conflict, instability, and war, supply chain risks and vulnerabilities increased, brightening and heating up the spotlight.
Lack of inventory and supply base visibility owing to siloed and manually managed procedures, separated departments, and a breakdown in supplier-internal team communication has also disrupted supply chains.
For strategic sourcing, supplier management, and demand forecasting, procurement transformation is needed to reduce supply chain strain and anticipate interruptions.
Discover strategic sourcing optimisation.
Tutorial: procurement transformation roadmap
To modernise procurement, outdated procedures and systems must be completely replaced with more agile ones. A roadmap helps outline goals, benefits, resources, and a transition schedule.
This plan helps firms enhance people, processes, and technology. Consider these questions for each procurement pillar to design your roadmap and transformation plan.
Objectives
- The corporation or procurement department’s goals?
- The importance or need of this?
Benefits
- What are the short-term and long-term benefits of transforming your procurement organisation and business?
- These benefits’ real and financial impacts on the business?
- How would procurement transformation help other departments?
Resources
- What resources are needed for procurement transformation?
- What expenses are expected?
- Does the procurement team have enough staff?
Timeline
- What is the transition timeline?
- How will it be executed? Pacing and structure: how?
- Any projected delays or bottlenecks?
- How will delays or bottlenecks be handled?
People
- The reform will affect which departments?
- Need to fill skill or knowledge gaps? What is needed to upskill existing teams?
- How will teams manage and share changes?
Process
- Existing processes: Are there inefficiencies? What are they?
- How do these inefficiencies influence procurement performance?
- Is a process overhaul necessary or can it be optimised?
- Does procurement encompass all needed steps?
- How will teams manage and share process changes?
Technology
- How is the current tech stack performing?
- Do existing technology and apps have disconnects that affect process efficiency or procurement department performance? Are disconnects caused by missing process automation, integrations, or robotic process automation?
How will teams be informed about technological updates?
After defining the procurement pillars, sell the end-state vision to leaders. To succeed, you must:
- Show the short- and long-term optimisation advantages. Instead than simply “save money,” illustrate the advantage in real life.
- Show ROI. Consider the financial effect to boost your benefits. Define the financial benefit of investing in automation software to save time or boost productivity.
- Map organisational structures and systems affected. Management of change is as vital as change itself. Clear and precise plans for how procurement reform will influence the organisation, who will be affected, which departments, and the timing will allay concerns.
Building a robust procurement transformation strategy
here are three methods to improve your procurement strategy if you’re ready to alter procurement.
Assessment of current roadmap
Today’s company and procurement demands change quickly, so be adaptable. A roadmap that made sense six months ago may not make sense now. You may better understand your procurement organisation, what changes need to be made to the roadmap, and how to enhance communication and engagement with stakeholders by analysing your present procurement plan.
Check that the roadmap fits the needs of the following:
- Supplier and stakeholder involvement
- Timelines
- Fixing problems
- Technology
- People
- Processes
This stage is crucial to meeting procurement and business goals and aligning the procurement transformation strategy and roadmap.
Define procurement strategy
A procurement strategy guides procurement change. After reviewing the roadmap and ensuring that all procurement pillars are aligned and prepared to meet short- and long-term goals, outline the strategy.
These questions should be considered now:
- The strategic goal? Goal of the end-state?
- Supplier performance? Which can be improved? Can it be improved?
- What people, technology, and procedures are needed to implement the strategy?
- What are strategic KPIs? How will they be assessed? Who will monitor, measure, and report them?
- What unanticipated developments are possible?
- Has a strategy been developed to implement and communicate this approach to stakeholders? How will strategy be communicated?
- Does the strategy support corporate goals?
- Does the plan support real-time updates, or will adjustments be difficult? If so, how might the strategy be agiler?
- Discover procurement strategy development and definition.
Align procurement transformation roadmap and strategy
Maps are only as good as their compass. Thus, the procurement transformation plan is useless without a clear procurement strategy. This stage involves identifying strategy or roadmap gaps.
A gap must be filled if the roadmap specifies when the transformation will be finished but the strategy does not specify how to execute it.
Automation unlocks procurement transformation
Procurement transformation boosts competitiveness, company agility, and procurement process resilience by maximising a team’s resourcefulness. Technology can enable this shift and make it last.
Implementing new technologies and optimising stacks to halt value “leaks” and future-proof procurement processes to counter disruptions is crucial to procurement transformation.
One example is business process automation (BPA) software. BPA software streamlines, automates, and orchestrates complicated, ever-changing procurement processes to change procurement.
Many BPA software choices include a visual user interface that allows procurement teams to develop, optimise, and automate processes or activities without technical understanding.
This layer of technology makes it easier to enforce supplier compliance requirements, simplify KPI reporting, improve process monitoring and forecasting, reduce errors and delays, stack extensibility, eliminate data or process silos that may interrupt or limit supporting procurement processes like purchasing, source-to-pay, or procure-to-pay, and improve working relationships and communication with suppliers.
Conclusion
Procurement transformation involves rethinking and improving procurement processes, not only embracing new technology. Businesses may improve efficiency, risk management, and market response by adopting a strategic and integrated strategy. This change requires a clear plan and strategy to align people, processes, and technology for success. Automation and continual improvement will help procurement organisations become more agile and competitive during this change.
