Much has been written about procurement transformation, and massive benefits have supposedly been achieved as a result of transforming procurement operations. Many of us probably think that they must have been pretty poor if there was that much opportunity for improvement. 

There are many situations where the issue was less one of capability, and more one of perspective.

Put crudely, the situation many purchasing people see themselves in leads them to no longer see the opportunities that are waiting for them to seize.

If you change the paradigm, allow purchasing people to do all that they are able, to bring the value they can to the table, the results can be truly amazing.

In a situation I am familiar with, the purchasing staff was accustomed to doing what they were told to do:

·         “Order this from this supplier”

·         “Write up a contract for this service with this supplier”

·         “Put this much of this item in inventory so you have it when I want it”

·         “If you don’t have it, get it now even if we have to pay for rush delivery”

·         …

By redefining the role, to define the role of purchasing as the commercial interface with vendors, and implementing and enforcing policies that supported that role, management drove the necessary collaboration between the users and purchasing. They adopted a set of processes, and underwent training to ensure they had the technical skills to fulfill their new role. The new manager of the group both led by example and coached his staff to grow into the new role.

The staff very quickly became adept at consolidating spend, bidding supplies and services, and negotiating favorable terms. They are now consistently reporting over $10M in economic benefits each year, while securing inventory consignment and sharing arrangements, and ensuring proper insurance, permitting and certifications requirements are being met.

How would you know if its time to think about procurement transformationion?

If you are in general management - and anyone can take this perspective if they try - ask yourself “Am I doing business with the right suppliers on the right terms?” The force of your “No!” will tell you how urgent and how much transformation is required.

If you are in procurement, then this can be a revealing moment, but it is difficult to know where to start. There are five questions any good procurement manager should be able to answer:

1. Is your spend under control?

2. Where is the money going?

3. Are you efficient?

4. How do you know you are successful?

5. What are you doing to prepare tomorrow?

In the next posts, I will look at each one.