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Procurement Transformation — The Ultimate Guide
📖 Table of content
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.
Whatis 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.
Reimagining Procurementfor 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.
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Challengesof Procurement
1. Integrating Sustainability
Sustainability is gaining popularity as many investors and customers pressure companies to integrate it within their procurement process.
This will become a challenge for many procurement professionals as many companies are still doubtful about sustainability as integrating it means a lot of investment. Thus, it will be hard for procurement professionals to convince the company to take the road to sustainability.
2. Governments becoming more involved in trade
The current events transpiring such as the war between Ukraine and Russia are one of the many pieces of evidence of how governments are becoming more engaged in trade.
The deteriorating relationship between countries can escalate to revocation or compromising trade agreements as it can be used to retaliate against other countries.
Additionally, when the relationship among countries continuously declines, the global supply chain will be severely affected. Thus, commodity prices may skyrocket which can be detrimental to many countries.
3. Unexpected rise in Supplies
After two years of a hard time for suppliers to keep up with the demand, procurement professionals will work on disposing of pre-COVID-19 stocks in their inventory.
This is because the delay of the supply last year is now coming. Thus, the unexpected surge in supplies is now flooding the inventory of many businesses.
It will be crucial for procurement professionals to fix this as they do not want to overstock or understock their inventory. Thus, many procurement professionals are eyeing the importance of inventory management systems and tools.
4. Online Fraud
As everything becomes digital, the intent to deceive companies will also go online. According to a survey by PwC, Cybercrime is the biggest fraud that many businesses face today.
Thus, procurement professionals need to think of ways how they can protect the valuable data of the company. Furthermore, procurement professionals will be more connected with the IT department of the company.
5. Training
In the last years, there has been a surge of employees resigning from their work. Thus, many are forced to hire employees with just enough knowledge to fill the post of a former employee.
Procurement professionals will also need to continue gaining knowledge about new things in the coming years to stay sharp on the risks and opportunities that may come along the way.
With our Negotiation Course For Procurement Professionals, you can stay up to date about the techniques you can use to land every deal that you have.
Stepsin 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:
People – 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.
Process – 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.
Technology – 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.
6. Roadmap
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.
Frequentlyasked questions
+ What is procurement transformation?
It is a shift from the accustomed processes to strategic methods in making procurement efficient.
+ Do I need to transform my procurement?
Yes. Transforming your procurement will help you to source and deliver the supplies in a timely manner.
+ 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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