Rahul Kaul,Manager, Presales and Support P&G Global, Corbus
Procurement transformation & striking the right balance between business and resources.
In recent past, procurement’s main focus was on building a well-structured strategic sourcing organization which included strategic and tactical procurement. The purpose and intent of supply chain management (SCM) was to remove excess inventory from the supply chain. Now, procurement has made great steps in developing sophisticated strategies, working across functions and delivering value to the larger organizations. Efficiencies would result with integration, visibility and collaboration with lean, agile and streamlined processes as the standard.
Attaining procurement excellence
Three routes to procurement excellence
1. Reconfiguration of the rules:
Global companies with divisions in different countries begin by focusing on the internal organization rewriting the internal “dimensions of the game” that are specifically related to collaboration, and then taking those rules to the supplier market.
Reconfiguration of the rules begins with establishing clear roles and responsibilities within procurement and at the interfaces of headquarters and the larger procurement organization, and then establishing responsibilities between procurement and other functions. This can be done with relatively little investment. A revamped procurement organization will quickly lead to savings from the supplier market that will enhance ROI for the organizational investments. This route is favored by most chief procurement officers.
2. Value Creation:
Reducing costs and creating value starts on the supplier side. It begins by setting an overarching goal that nobody can resist. For example, achieving millions of dollars savings immediately will reduce initial resistance or fear within the company. As procurement makes changes with its suppliers, it builds a probable future organization by testing cross-functional collaboration on specific sourcing groups. In the end, the savings from these external changes help in justifying any changes in working style and drive long-term internal transformation. Also, employees often don’t even see the subsequent organizational changes as “change,” per se.
Commitment has been seen as a direct route in achieving procurement excellence that aligns external and internal efforts simultaneously. It requires most of the work, along with strong top management attention, full commitment of the board, and alignment to the procurement transformation program.
Tapping into People Power
People are a vital element in every organization. From our analysis of the champions, we have identified five ways that keep the organization’s people engaged and focused on their goals:
Lead the transformation: All procurement champions have one thing in common i.e. leaders who provide a top down approach in resource and process augmentation, remove obstacles, and take personal accountability for procurement’s success. Particularly with the “direct” route, putting the best people in charge of change will guarantee success. As one CEO emphasizes, “Tell me the person you need for our company to have best in class procurement and we will make them available.”
Create a case for change: Procurement champions make a compelling and logical case for change. No matter the goal—whether to save money, to become best in class, or to survive an economic crisis—it is communicated clearly and succinctly for everyone in the organization to understand. Also, it is important to note that procurement champions find the intrinsic and personal case for change that helps the employee answer, “What’s in it for me?”
Mobilize stakeholders: Even top managers resist status quo; no one likes to come out of their comfort zone. In procurement, this is usually manifested in an extended relationship with a long time supplier when another might be a better fit. Propelling people out of their comfort zones requires providing support and involving them in the process.
Becoming a procurement champion requires an ability to achieve substantial immediate savings and possessing what it takes to succeed in the long term. This can be a complex undertaking, as it requires bringing together multiple interlinking parts, including tangible (internal organization and external suppliers) and intangible (resource) elements. The “people” part is paramount. Every procurement champion should have something that its less successful competitors do not have i.e. passionate individuals who are prepared to commit to the long haul. Thus, in the end, it is the secret behind a value-driven procurement organization that enjoys continual prosperity, year in and year out.