Mantra for successful procurement transformation

Organizations are increasingly becoming complex due to globalization and accelerated growth-organic and inorganic. While this growth is important for business, if it is not managed well, it impairs business agility thereby increasing strategic risk for the organization. Successful organizations that have mitigated this risk well have business processes that are EFFECTIVE, EFFICIENT, and COMPLIANT. The question is “How to make business process lean that are efficiently executed and are complying to organizational policies, procedures and trade laws?”.

Based on decades of experience in driving procurement transformation initiatives, I am recommending the following framework for making processes better.

reengineer-process

The framework is elaborated in the following sections:

A. Re-engineering Procurement Processes

Comprehensive analysis of existing business processes is vital before re-engineering them. The key is to understand what the key pain areas are, what challenges are faced by business users, and what are the non-value added tasks. Review of process maps, procurement policies, stakeholder interviews, and conducting business user surveys are commonly used for this analysis. The deep dive should include processes, supporting applications, analytics, business users, and business data.

The next step is to identify gaps in existing processes as compared to Best-In-Class processes; both cross industry and industry specific best practices should be considered. The key metrics like lead times, compliance percentage, cost per transaction, and procurement spend per FTE should be compared with benchmarks to measure the gaps.

Based on the above two steps and considering industry specific processes and legal requirements, the procurement processes should be re-engineered to make them lean, value added, and effective.

reengineered-process

B. e-Enabling Procurement Processes

Having re-engineered processes, the key is to ensure that these processes are efficiently executed in compliance to the expected processes. This is best achieved by digitizing these processes by using procurement business applications. Key considerations should be to deploy applications that are providing high fit to the re-engineered business processes and have lowest total cost of ownership.
e-enabling

Once processes are digitized, right process effectiveness measurements need to be put in place. They need to be periodically reviewed and variance should be analyzed to initiate appropriate remedial actions. This will ensure continuous improvement and efficiency in the processes.

C. Driving Adoption Of Processes

The key to get right business benefits is to ensure that the effective and efficient processes are uniformly adopted by all business users. Due to differences in skill, competency, education, and experience, there is wide variance in maturity of business users. This makes the adoption process difficult and change management challenging.

To derive a tailored user adoption approach, it is recommended to do Skill & Competency evaluation of business users, segment them, and define specific training approach for each of the user segment. This will ensure that users are aware of and build expertise in revised business processes and accompanying applications. Organizations typically adopt multi-channel (class room, virtual, and self-learning) user training approach supported by many artifacts like user manuals, day in life of purchaser, quick reference guides, recorded webinars, et al.

To further drive adoption, it is recommended to form “Business Support Group” (BSG) of process and applications experts who will provide role specific support to the users. BSG is typically tasked to provide business services like sourcing event support, large contract management, and managing catalog content.

process-graph

While the procurement transformation framework is not revolutionary, it is amazing to see the results if all facets of the framework are executed well.

Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedIn

Leave a Reply

Your email address will not be published. Required fields are marked *