Procurement Transformation — The Ultimate Guide of 2022
Procurement transformation has developed the procurement process to its potential. Through the transformation, procurement has evolved rapidly. But, what are the transformations that happened in procurement?
This article will tackle what procurement transformation is. We will explore how the transformations reimagine the procurement process to help it develop to what it is today.
After reading this article, you will have an in-depth knowledge of procurement transformation. Additionally, you will know how it will be effective to transform your procurement process too.
What is Procurement Transformation?
Many professionals define procurement transformation as a revolutionary shift that changes the behavior of an organization in acquiring goods and services to ensure maximum value.
In simple terms, it is the steps that are needed for the organization to change its procurement functions to be more efficient.
Procurement transformation entails establishing strategies to make major and long-term enhancements to procurement and supply chain processes.
Procurement transformation heavily relies on the application of numerous strategic, tactical, and transformational tools, and techniques. This application can greatly impact every aspect of costs that can help develop and sustain the organization.
The pandemic made many organizations worldwide ask their procurement team to take a larger and more strategic part in its growth and sustainability.
In order to meet the expectations of the organization, procurement professionals have stepped up their game and allowed procurement to transform.
Procurement transformation requires making changes to the traditional processes and replacing them with fast, agile, and efficient processes. The pandemic has forced many organizations to speed up procurement transformation.
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Reimagining Procurement for the New Normal
In 2008, the global financial crisis affected many companies. According to McKinsey Analysis, high-performing functions have helped many organizations recover from the 2008 global financial crisis.
If procurement has led the way out of the global financial crisis in 2008, it can do it again. However, the success of procurement transformation relies on reimagining every aspect of its function.
The COVID-19 pandemic has put a lot of strain on supply chains globally. It has interrupted the delivery of needed materials due to restrictions that are in place.
Governments have shut down airports and seaports that are critical for the delivery of goods due to the pandemic.
At the onset of the pandemic, many procurement departments have switched to crisis mode to help companies ease some disruptions.
Many organizations source protective gear, disinfectants, rubbing alcohols, and masks to secure their employees from acquiring the disease while working.
Based on McKinsey’s research, companies can continue relying on procurement to recover from the pandemic. But for this to happen, it must tackle all the challenges it will face in reimagining the procurement process.
Challenges of Procurement
1. Supply chain disruptions and shutdowns
The supply chain is very complex. Many organizations procure their supplies overseas. The lockdowns of countries have caused disruption to the supply chain due to the delayed deliveries of goods.
Many supply chain leaders are planning to counter the effects of the disruptions by increasing the resiliency of their supply chains.
2. Changing ways of working
Work from home has become popular even before the pandemic. The switch to remote working has been implemented in almost every industry.
Meetings, negotiations, and other face-to-face interactions have gone virtual. This calls for a new way of procedures in organizations.
3. Shortages due to demand
At the onset of the pandemic, many organizations have felt the increasing demand for essential products like sanitizers.
This entails procurement leaders collaborating closely with sales and demand-planning teams to predict and react immediately to the changes in the market.
Steps in Transforming Your Procurement
1. Defining your procurement strategy
This step defines the strategy you will implement in transforming procurement. In this step, you will answer why you want to transform your procurement. Additionally, you will explore the factors that influence the transformation.
2. Defining the benefits of procurement transformation
Once you define your strategy, it is time to know the benefits of transforming procurement.
The benefits that you can gain from transforming procurement are fewer disruptions, a resilient supply chain, enhanced risk management, and anything that can give value to the organization.
3. Procurement transformation assessment
In transforming procurement, you must know these three areas:
The most critical and valuable aspect of procurement transformation. You need to understand the current skill sets of your people. This will allow you to know if their skill sets are capable of achieving procurement transformation.
You need to assess if your current process is aligned with the procurement transformation that you want.
For example, if your goal is to improve customer experience, then a long process of approval will not cut it. For this, you need to ensure that the approval process will be simple and fast.
You need to have the right technology for the transformation to happen quickly. The goal here is to know the role of technology in your procurement transformation.
4. Know the scope of the transformation
You need to know the scope of the transformation to define what is covered and how long will it take to achieve it. The scope needs to answer your role in the procurement transformation
5. Technology-based transformation
Obviously, technology is the key to transforming your procurement. However, it needs time and investment. It is important to invest in technology to streamline the process of procurement transformation.
Just like every transformation, it happens gradually. You should create a roadmap to know how long it will take you to achieve your goal.
It needs to plot the resources and timelines to ensure that the transformation will happen without any disruption.
Frequently asked questions
1. What is procurement transformation?
It is a shift from the accustomed processes to strategic methods in making procurement efficient.
2. Do I need to transform my procurement?
Yes. Transforming your procurement will help you to source and deliver the supplies in a timely manner.
3. Is technology important in transforming procurement?
Yes. technology is the key to transforming procurement. With technology, procurement becomes fast and efficient with its processes.
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