Procurement Maturity

In a previous post, we looked at installing the proper foundation for implementing a procurement blueprint within an organization, based on a procurement transformation approach outlined by Future Purchasing. Today, we will take a look at how to build on that foundation so that an organization may develop maturation in this procurement methodology.

Though not every organization will advance at the same pace or follow the same path toward achieving their procurement goals, this model should help to monitor progress and identify the developmental traits in leadership and team profiles.

Operational Excellence
If Phase 1 was categorized by the creation of an organizational blueprint, Phase 2 is all about achieving that desired operational excellence. As was established in the foundation, an organization needs to empower their Chief Procurement Officer (CPO) or procurement leader(s) with sufficient resources and operational support.

With a commitment to the process having been adopted, the organization is ready to build on this platform of success. CPOs should now focus on enhancing the capabilities of their procurement team by pushing into new areas of expenditure, processes, and projects. In order to attain greater margins through supplier relations, CPOs need to push their team to build stronger bridges within the business.

There needs to be a real depth of skills and capabilities across the procurement leadership teams. High levels of board sponsorship and involvement can help to assert a balance between functional skills and leadership ability. With substantial budgetary provisions and the willingness to replace any underperforming procurement personnel, the organization can back the major change that is often crucial to achieving their set goals.

With the continued integration of key operational performance metrics, such as total savings and service delivery, the CPO can ensure the proper balance in cost, value, cash, and service. By taking a cross-business, cross-functional approach, the CPO can lead the close integration of procurement into the business planning cycle.

Procurement Competence
The final phase can be defined by an organizational restructuring and redefinition. A strategic alignment has occurred, and procurement is now at the heart of any new operating models. There has evolved a new and very different focus, with an enhancement of the procurement capabilities between the supply markets and the leading groups inside of your organization.

This is procurement as a business competence, rather than a functional one. A CPO of executive stature and inspirational vision is required to closely integrate and align procurement operations with those of your organization’s major suppliers.

Your CPO needs to have secured a considerable voice and involvement at the board level, one capable of fundamentally shaping the company’s interests, strategies, and direction. The CPO should be a trusted participant in key business forums and an important strategist in defining initiatives going to the heart of the organization.

The organization can support procurement at this phase by providing the CPO with the resources for a very strong talent pool and considerable in-flows into the team. With the established connections between the procurement team and the major suppliers of business drivers, this phase relies less on organizational support and more on systematic necessity.

An organization in this phase has created a system where their procurement team doesn’t need the micromanagement they may have had in the earlier phases. The CPO should offer them a nurtured rapport in a sometimes subtle system which allows the entire department to succeed, intervening more in the implementation of new supply/distribution channels and with the more significant/concerned partners than in the day-to-day minutia.

Once again, proper procurement maturation can still be largely connected to performance implication metrics. An innovative, yet perpetual leader should continue to drive results in both new and established supply chains. Let’s face it, revenue is the bottom line.