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Procurement Transformation

When is the last time you looked at your procurement division? Have you updated any of the processes recently? What about personnel? Are you encouraging them to continue their education and development? Or perhaps someone has just been filling that role temporarily and it is now time to move them into something more permanent and hire someone with the education, experience and background necessary to make a complete transformation of your procurement processes. Sound scary? We aren’t talking about massive overnight changes, but rather a consistent, strategic approach that over time will yield tremendous improvements to the entire company.

Sanofi, a global healthcare company, spent several years making over their own procurement policies and procedures. As a result, they have experienced a 60% performance improvement for 20% reduced cost. Those numbers should get your attention. How would you organization like to realize that type of improvement over the next couple of years? Is it possible? Absolutely! Is it likely? Well, we certainly cannot guarantee those results for everyone, but does that mean you shouldn’t try? What if you only improve 50% or 20% or even 10%? You have still improved so it is time to get to work.

In order to make a complete transformation you have to look at everything: organizational hierarchy, personnel, processes, systems, and software. It could be that you hire an unbiased third party to do an analysis and make some recommendations or maybe you take a representative or two from each department and form a task committee. There are pros and cons to each. If you opt to work internally, be sure that someone with meeting experience moves every meeting along in a timely and professional manner so that they don’t become gripe sessions or wasted time. You will also need someone, possibly the person running the meetings, who has final authority in making decisions. Even though we live in a country accustomed to elections, votes, and everyone having a say in many decisions, these changes cannot be left to “majority rules”. There may be a time with the decision maker has to step up and break a tie or possibly overturn a poor decision, even one that is popular among the committee members.

Once that is in place start looking at everything. The advantage to utilizing people from various departments is that you may quickly discover problem areas in the hierarchy – areas where communication breaks down, decisions are delayed, or redundancy takes place. Whatever the problems, if allowed to speak openly without concern for reprisal, you may be surprised at what you discover.

When looking at the personnel involved it could be a little problematic using internal resources. Depending on the existing structure, any new structure or hierarchy established, and the people involved in the purchasing and procurement department, you obviously cannot have peers calling for replacements or recommending that someone else be in charge. Or the discussion could involve brainstorming ideas for new positions that don’t yet exist. Just exercise a little wisdom in what form and function this topic takes.

Finally, you will want to examine the processes, systems and software you have in place. All of these are intricately connected and tied together. It may be that small revisions need to be made over time or it could be that the entire system needs to be rebuilt from the ground up. Which direction you go will depend largely on your budget, goals, and what conclusions you draw building to this point.

This may all sound overwhelming, far-fetched or downright impossible. But it has to start somewhere. Use this article to get some discussion started with your peers, your boss, or company executive. Bring it to your next executive meeting and get it added to the agenda. Present it to your management team and ask for feedback and ideas. The hardest step is always the first. Get that started, break it down into manageable goals and find your company on a journey to improve in many areas.

April 23, 2013
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BY Bellwether
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