This week HCMWorks sponsored the Sourcing Interest Group’s (SIG) Innovation Forum in Toronto. This year’s event drew close to 100 procurement professionals predominately from Canada with a small U.S. contingency. The event was hosted by Telus in their LEED CS (Core & Shell) Gold certified building issued by the Canada Green Building Council in downtown Toronto. (More on the building go to: Telus Green)
Across a host of procurement transformation, innovation and thought leadership, the one day event was rich in content. However, HCMWorks observed a few key reoccurring themes that seemed to be prevalent amongst this group, especially at the HCMWorks hosted Roundtable. Our roundtable drew approximately 45 participants in 3 different sessions. The topic discussed was:
Procurement Organizational Models:
Centers of Excellence
The discussions surrounded how to affect procurement transformation. Here are some of the key “take-away’s”:
No company that shared how their procurement organization was organized seemed to feel that they were squarely in one of the 4 models. All organizations felt they were a hybrid.
Within each company’s procurement department participant shared that certain areas fell into different organizational models. For example; one company might have a Center of Excellence for contracts and then have centralized sourcing for purchases over a certain spend threshold.
All companies indicated having varying spend thresholds that triggered engaging procurement in some aspect; sourcing, contracts, supplier risk, etc.
There was a big spread in overall spend under management amongst the participants ranging from 40 – 95%.
There was also a big spread in the self-proclaimed maturity of their procurement organization, ranging from the “very mature and transformed” to the “emerging credibility” within the company.
Needless to say, the differentiating models and maturity were extremely interesting but the common underlying issue that we uncovered was that all organizations seem to struggling with procurement “administrivia”. The transactional and administrative work inherent with procurement is serving as an inhibitor to more strategic growth and maturity. All roundtable participants echoed the sentiments that managing transactions, contract processing, and supplier relationships were preventing them from acting in a greater strategic capacity to their corporation.
Many of the procurement executives we spoke with expressed frustration in having the lack of staff and/or systems to off load the more administrative actions within procurement to allow them to do what they are trained and experienced to do… Source, Negotiate and Manage large corporate buying activities.
At HCMWorks we know, through our firsthand experience working with clients, that changing this focus can have a substantial ROI for any company. Shifting the focus of away from transactional and more focus towards strategic activity within procurement operations can have a compounding effect on savings. A basic business strategy to move an organization forward; outsource the routine/non-core activities and keep the professionals focused on the highly leveraged activities.
Much of the value HCMWorks brings to the market has been in the accounts where we have taken over the transactional day-to-day support and enhanced the procurement professional’s ability to deliver real value. By senior procurement staff being afforded the time to focus more intently on key buying, negotiating, and contract actions, the company can experience greater strategic direction and support. Additionally, this also comes with greater risk mitigation and compliance. Outsourcing the transactional, contracting, and reporting to a 3rd party enables a greater visibility to the procurement organization. This visibility continues to enhance the strategic capabilities of the department. Remove the elements that bog down procurement operations, outsource non-core activities and put the Strategy back in Strategic Sourcing.