10/2/2022 0 Comments How Procurement Transformation Can Help You Add Value To Your Procurement FunctionRecent events have left the global economy trying to recover from the impacts of a pandemic and Russia’s invasion of Ukraine offers a grim outlook for future economic growth.
With inflation rising at an alarming rate in major European economies, there are limitations in the global financial conditions. These challenges have paved the way for new opportunities and businesses must look to the future to develop bespoke solutions that can overcome them. Businesses must also acknowledge the fact that there is no one-size-fits-all approach that can solve any problem. They must approach each situation they face based on their own merits and also take into consideration whether they can mitigate these problems. The procurement function is one of the most impacted business functions, and businesses are trying to secure their supply chains to maintain a competitive edge over their competitors. With the challenges that contemporary businesses face, there is an urgent need to bring the procurement function to the forefront and add value through procurement transformation. So how does this transformation help you add value to your procurement function? Increases cash flow and profit margins Every business, irrespective of the industry, has a single goal: to increase cash flow and boost profits. Businesses depend on a steady cash flow to help them keep their business running and eventually boost their revenues and improve profit margins. When it comes to procurement transformation, this creates an almost immediate impact since procurement consists of a large portion of company resources that are dedicated to expanding supply chains, increasing sustainability, improving supplier relationships, making cost-effective purchasing decisions, and more. With procurement occupying a significant number of resources, the function plays a key role in ensuring that resources are allocated efficiently and that they are well within the financial and budgetary considerations. Transforming procurement into a strategic business function gives it the ability to become more impactful on other important business functions and drive profit margins and cash flow. Helps you gain a competitive edge As the world changes and adapts to a more technology-driven economy and marketplace, businesses are vying to stay ahead of their competition by establishing cutting-edge systems and processes. Joining the digital revolution may have been an option a few years ago, but today, it is no longer a question of it being a unique selling point—instead, it is a necessity. Many businesses that do not adapt to these rising technologies may be left behind if they do not welcome transformation. The procurement function is a key business function and has a lot to benefit from digitalisation. Adopting this key function can give your business the ability to select the right framework and digital systems for their function. Focuses on the future of procurement With the recent events that have made businesses warier of uncertainty, no doubt predicting emerging disruptions is becoming more difficult. These challenges are only magnified when considering the changing consumer priorities and market volatility. Procurement transformation can help you mitigate these risks by developing and maintaining a more future-focused approach that is based on resilience—a vital quality that any business in the contemporary business landscape must possess to survive in times of uncertainty and crisis. Businesses can also formulate short-term and long-term objectives in more strategic ways to ensure that both the procurement function and the business has everything they need to plan and add value to the function. How you can accelerate your business’s procurement transformation It is no secret that procurement has become a key driver of business objectives and the responsibility of executing these objectives falls on the shoulders of procurement leaders and teams. Transformation is a continuous process, especially considering the innovations that are taking over the marketplace. While having a transformation solution for procurement can be a definite advantage, businesses need a procurement framework that is both resilient and responsive to change. Whether it is developing a procurement transformation framework, a sustainable procurement function, accelerating Procurement 4.0, or procurement training, there are several ways that you can transform your procurement function to become more robust. The functions of the entire company depend on the smooth functioning of the supply chain and purchasing operations becoming even more instrumental in being the driving force behind the transformation. Investing in procurement and getting the right systems and frameworks to generate more advantages for businesses should be the priority of every business leader regardless of the size, industry, or objectives of the organisation.
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In a modern business, the goal of procurement transformation is not just to create cost savings and optimise processes; it must also bring about a shift in the organisation from transforming reactive internal functions to responsive and strategic functions.
A successful transformation should result in innovation and competitive advantages for your business. This does not, however, require a radical change in processes. Rethinking and reinvigorating the operating model while introducing new technology and key roles into the organisation can support both of these goals. As an organisation grows, the harder it becomes to reshape its functions and processes. The mere thought of running a business with a multi-million dollar spend portfolio through an internal transformation can be daunting. That is the case, however, until you identify the exact points of focus for transformation and strategise how to break down and streamline this process. Introduce parallel development across your procurement transformation The biggest challenge in driving change across processes, operations, and technology is deciding where to begin and how to proceed. A good way to approach this would be to drive transformation in a parallel movement across each of these components. In order to ensure that the decision-making is cohesive across each of these, you must also identify the relevant technology, people, process requirements, and work closely with external partners and internal stakeholders simultaneously. This will not only streamline the transformation process but also help you make more informed decisions on what adjustments should be made in real-time. Create centres of excellence for sourcing As businesses initiate mergers and acquisitions and expand, a complex and overlapping structure inevitably takes shape. This can result in the same executive or manager handling processes that are of differing priorities, leading to wastage of resources and inefficiencies across the board. By creating centres of excellence focused on sourcing, for either different regions or various business units (depending on the scale of your organisation), teams can refocus their efforts on higher value-added initiatives across supplier management and strategic sourcing. This can also bring about a balanced workload and shared responsibility where your procurement professionals will not be required to shift their attention between deals worth millions and lower-value commodity contracts. Leverage digitalisation to create a single channel for the purchasing process One of the main goals of your transformation should be to create a standardised, singular point of entry for purchases across your business. A contemporary procurement priority is to integrate finance, risk, compliance, and sourcing under one cohesive vision that gives you an overview of the overall purchasing process. Identifying this as a key goal will guide the direction of the transformation process and the digital systems you utilise to help you achieve this goal. In this stage of your transformation, the right source-to-pay suite can be the answer to your needs. Make your processes more efficient to speed up time-to-market As you plan your transformation, an important factor to consider is how to make certain processes more efficient and responsive to critical market requirements. While this should be a key outcome of procurement transformation, it should also be fully understood while businesses are devising and launching new operating models. Conveying this goal to your team and relevant internal stakeholders creates value for your company by speeding up time-to-market and overall business timelines. Factor future business growth into your transformation A business should always account for its growth. With each new expansion or acquisition, your frameworks must be able to support your growth without needing to be built from scratch with every new development. The adaptability of technology becomes an important feature to respond to this procurement need. During the transformation process, your business must invest in strategies that are resilient and can manage and utilise organisational resources efficiently regardless of uncertainties in the market. Having to integrate new processes into your business at every turn is not practical and will inevitably lead to undermining the foundation of the systems you have in place. To avoid this, it is vital that any transformation that you need to undergo factors in the possibility of growth. Leverage high-value opportunities with simplified and streamlined processes As your procurement operations are optimised through the use of digitalisation your procurement teams are freed up for higher value-added tasks such as supplier management, strategic business goal formulation innovation maximisation, and capacity building across your teams. This is certainly a great opportunity for companies to spur internal growth for their teams and support people development through new and dynamic opportunities. Identify the key steps that will simplify and streamline your procurement transformation Procurement transformation can seem daunting at the outset. By leveraging the right digital solutions and integrating your processes strategically, however, your organisation can realise its goals and enjoy a more straightforward path to efficiency. Consulting in procurement must adopt a mindset of continuous improvement; a mindset that can transform the way business is conducted, from the inside-out—helping you fix the hole in your wall and hang up a painting in that space, if you will.
Continuous improvement has less to do with actual business processes that are discussed, implemented, and managed, and much more to do with the collective attitude towards business structures. When the collective impression towards consulting in procurement shifts to continuous improvement, it automatically improves how a business consultant can assist their clients with achieving their short- and long-term business goals. The new normal--and a new value--for consulting in procurement If companies are forced to contend with the uncertainty of “the new normal”, business consultants must follow suit. COVID-19 may have caused widespread uncertainty and thrown many industries and companies out of their comfort zones, but this is neither the first and nowhere near the last crisis we will be forced to battle in the coming years. In recent years, consulting in procurement has experienced a positive shift from driving ruthless efficiency to unlocking human brilliance and inspiring innovation. While crisis strategies demand a focus on essential procurement qualities like resilience and sustainability, post-crisis, these essentials become more closely aligned with the human aspect of procurement. Each supply chain is, after all, made up of people. Whatever functional expertise you’re after—procurement, finance, and project management—the one constant is the human aspect of these functions. Post-crisis procurement consulting needs to build on this human aspect and empower it to drive business success. Preparing for the future without losing sight of the present An uncertain economic environment means that a business needs to be on its toes in anticipation of the next crisis. The role of consulting in procurement, then, is to alleviate the anxiety a business experiences and ensure that its short-term survival can be assured without endangering long-term objectives. The global strategy industry has been on an upward trajectory for many decades and is expected to expand further from $44 billion in 2017 to $91 billion by 2025. Consulting is here to stay, but it needs to change its approach to keep up with the changing world. The best and only way to assure the future of consulting in procurement, finance, and project management is to deliver more value for less; bring in new ideas that challenge established processes; take measured risks that drive value; never lose sight of the bigger picture, and move towards the future of procurement with every process. Companies like Kronos Group are leading the charge towards the future of consulting in procurement in a world post-COVID-19. Contact our skilled business consultants for insights on procurement, finance, and project management today. |
Kronos GroupKronos Group has been named one of the fastest-growing companies in Europe. We provide custom solutions from procurement and finance to project management. We support our clients with expertise in business transformation and operations consulting. Project Management |