Procurement teams today are constantly faced with challenges and opportunities from increased competitiveness, accelerated globalization and the growth of services as a key marketplace differentiator. It has therefore become important for organizations in a variety of industries to reassess their existing strategy and continue to validate its effectiveness based on both the present and anticipated future business environments. This is achieved by procurement transformation, a process that produces long term benefits to the organization.
The Need for Transformation
Procurement transformation is a holistic approach to improving all aspects of procurement in an organization, for purposes of achieving long-term sustainability. Continual procurement strategy planning and the resulting transformation initiatives contribute to billions in annual cost savings for businesses, while delivering leading products and services to the world. Such a procurement strategy supports the continuing desire of a business to remain competitive, drive productivity, cost reduction, as well as guarantee supply quality, security and continuity for customers.
The core element for any successful procurement strategy derives its value from its people, processes and technologies. These contribute in securing products and services in support of internal partners and external clients, thereby developing and delivering quality products and offerings. The benefits that result from this type of activity include:
Increased profit from the best type of commodity, labor and delivery cost reductions
Improved client and internal partner satisfaction based on improvements in supply quality, continuity and the value of products and services received
Optimized cash flow
Developing Your Strategy
Businesses need to operate under a continuous planning cycle to refine their procurement transformation strategy. This entails incorporating the following key elements for strategy development, which are applicable to all organizations:
Strategic Marketplace Drivers – Customer, supplier and competitive landscapes
Corporate Strategic Intent – This includes driving profits and growth consistent with the principles and strategic imperatives of the business
Procurement Business Design – Increasing procurement leverage, year on year productivity improvements, and facilitating strategic growth and value
Innovation – Incorporation of technological advances or process design that emanates from suppliers, laboratories and research teams
By following this model, a business is able to internally develop a set of strategic actions for addressing these challenges and take full advantage of opportunities in the fast paced marketplace. Key to this strategy is the alignment of the highlighted strategic actions into various imperatives that represent the nucleus of the procurement transformation strategic plan, which is applicable to most procurement organizations.