The role of procurement has evolved significantly over the last five years to keep pace with the agile needs of today's business environment. No longer is the department a simple cost center focused on execution. Technology innovations have made it possible for organizations to transform procurement departments into strategic epicenters for streamlining sourcing processes, managing critical vendor relationships, and saving money.
Recently, IBM Institute of Business Value (IBV) released a study on the impact that Chief Procurement Officers (CPOs) can have on a company's long-term profitability. The study found that top-performing procurement organizations showed profit margins 15 percent higher than the average company. Time and again, it has been proven that responsible sourcing strategies can lead to long term business success. Recognizing the ever-evolving role that sourcing has within businesses, nearly every industry is shoring up their procurement practices, looking for ways to promote greater savings and more opportunities to collaborate across the business with strategic supplier partnerships.
Implementing such changes can be challenging for organizations of any size. Using a customer's experiences as an example, we will walk you through how to go about transforming procurement processes. We'll also go over how procurement technology can help you invest in the success of your future.
Recognizing the Shift in the Role of Procurement
Procurement's value proposition will continue to fundamentally change through an increased ability to analyze trends, data and relationships. It will be able to get ahead in terms of planning and forecasting, predicting future outcomes, and managing finances accordingly. This shifts procurement to a far more influential role than it's ever been before. However, with that influence comes the need for more focused procurement teams. This is where technology helps. By automating sourcing tasks, talent is freed up to spend their time on critical research, relationships, delivering deeper insights and building a pipeline for opportunity, rather than manual day-to-day task-based work.
Implementing a New Sourcing Process or Technology
While many in your organization may recognize the role that procurement plays, there may be significant hurdles when it comes to implementing a new sourcing process. Take, for example, VSP Vision Care. VSP is the largest not-for-profit vision benefits provider in the United States, with 77 million members across the country. With a business of that size, their procurement department needed to make sure that they achieved 100 percent early engagement within the business and the supply base. By implementing flexible, transparent procurement processes, they could facilitate better visibility and collaboration across the enterprise and supplier base.
Culture is one place to begin such transformation. Many enterprises have an internal - inherent, even - aversion to risk and change. Take the necessary time to consider cultural factors, develop a plan of action that will resonate with your stakeholders, and collaborate through communication channels to engage the entire enterprise.
Get Started Early
Once you consider culture, develop a plan of action, and communicate the change to the enterprise, what's next? For VSP, their crucial next step revolved around early engagement. They had a seat at the table and took engagement a step further by prioritizing open collaboration early in the process to establish what the actual needs were. That not only reduced the time for supplier transactions from start to finish, as the business wouldn't get too far down the path of single sourcing, but it also helped the sourcing team determine what would work best from a pricing and terms perspective.
VSP achieved this through the implementation of self-service sourcing. By leveraging collaborative workflows and standardizing processes, VSP can now work with a technology platform that allows for automated functionalities, easy drafting, collaborative planning and evaluation of sourcing events, and seamless team adoption.
When it comes to creating meaningful change in sourcing - including implementing the technology that makes that change possible - there will likely be barriers. But, by understanding culture and developing the best possible launch plan, as well as encouraging early and open collaboration within the lines of business, procurement teams can mitigate some of the roadblocks obstructing overall success.
About Stan Garber: As co-founder and president of Scout RFP, Stan sets the marketing and growth strategy. He previously was a co-founder in ONOSYS which was acquired by livingsocial in 2012. At ONOSYS, he led the business development and financial functions. Prior to this, he went to Case Western Reserve University where he studied Finance and Management.