5 Procurement Shifts Organizations Must Make to Succeed
by Salim Khalife – Founder, President and CEO
In its Procurement 2020 study, Gartner highlights trends impacting corporate functions, and outlines fives procurement shifts organizations must make to succeed. The study outlines both the current and future states in each of five areas and offers details about the steps organizations must take to advance procurement operations. As we come to the end of 2020, we thought it would be helpful to condense Gartner’s findings here and offer a bit of our own perspective on each of the five procurement shifts and how they can positively impact procurement organizations in 2021 and beyond.
1. The shift in value drivers
“Procurement uses new technologies and an increased focus on analytics to generate and enable quick action on insight regarding the supply market, supplier performance and business buying behavior.”
As part of this shift, the procurement function evolves to focus less on simple transactional efficiencies as a way of reducing costs and more on leveraging data and insights to eliminate overlooked inefficiencies and identify new sources of value and savings.
To make the shift, organizations will need fast and reliable access to decision-making data. For example, by centralizing procurement functions, procurement professionals have visibility into purchasing behavior across the organization, allowing them to better understand business buying behavior and identify duplicate or wasteful spending. In its Guide to the Business Case for Today’s Remote Workforce, Levvel Research found that automating steps in the spend management cycle can eliminate inefficiencies and drive new savings. The report identified operational efficiency savings including a 65% reduction in the cost of per purchase order and an 85% reduction in the cost per invoice stemming from a focus on strategic automation.
2. A shift in procurement’s role
“While focusing on top-tier buys, procurement enables the business to independently source mid- and low-tier buys, acting as a sourcing advisor when needed.”
As the importance of procurement’s role in the organization grew, so too did procurement’s scope of responsibility — until the procurement department was involved in sourcing even small, routine purchase requests. As part of the shift of procurement’s role, transactional and mid-tier buys will be pushed out to individuals or departments, freeing procurement to focus on high-value strategic sourcing.
To make the shift, organization need procurement management software tools to guide and direct employees’ spend to keep it within the organization’s rules and parameters. Mobile procurement apps are a real asset in this shift as well, empowering mobile and work-from-home employees with the tools they need.
3. The shifting business role
“The business will gain more responsibility over its sourcing decisions and own more of the consequences of irresponsible sourcing, as well as more of the partnership activity with suppliers.”
As part of this shift, organizations will empower their internal business partners to source more on their own, using workflows, approval sequences, tools and data that keep spending activity within organizational boundaries.
This will involve coaching and training business unit managers to help them own much of the sourcing cycle, while establishing a simple process where they can reach out to procurement professionals for higher-level sourcing support.
4. A shifting delivery model
“Experienced category managers will conduct the most important buys, while procurement process experts will provide purchasing guidance to business units.”
This shift builds on the third, above, in that it further pushes additional procurement processes out to the business units, freeing the procurement team to focus more on overall process excellence than on specific category knowledge.
To execute on this shift, Gartner suggests building experienced Category Managers that will conduct the bulk of the strategic purchasing activities. The procurement team can provide a supporting role to the Category Managers, and step in to provide guidance where sourcing knowledge is low.
5. A shift in resource investments
“Investment in people will focus on professional advisory skill sets, while technology will focus on enhancing the purchasing customer experience experts to a greater extent.”
This shift is already underway in companies all around the world as part of their digital transformations. The Resource shift involves investing in personnel that bring professional and analytics skill sets, not a set of transactional skills. It involves an investment in technologies including machine learning, advanced OCR capabilities, artificial intelligence and electronic catalogs.
The benefits of this shift are supported in research conducted by Levvel Research, which highlighted the difference between “computerization” and “automation.” True automation, Levvel asserts, entails shifting the entire procurement process to a singular solution in which all tasks, tools, and data are centralized and optimized.
Procurement, like all business functions, must evolve to meet a changing world and a changing workforce. These five shifts can be a helpful guide for progressive procurement professionals as they formulate their strategies for the balance of 2020 and beyond.
About the author:
Salim Khalife is the founder, president and CEO of Paramount WorkPlace, a technology company that develops, sells, and supports advanced web-based and mobile requisition, procurement, and expense software solutions for mid-market organizations. The company introduced its first cloud-based SaaS requisition application in 1997 and continues to innovate and expand its partnerships and integrations ever since. Learn more at www.paramountworkplace.com.