Procurement Transformation: Which Path Are You Traveling?

The starting point in any supply management transformation needs to be the overall business strategy and objectives for supply management at that company.

By Robert A. Rudzki

April 13, 2017

With all of the hype regarding the promises of the latest technology, now seems to be a good moment to dust off one of my favorite blogs from the past. If it can save just one CPO their sanity, and their job, it will be worth it.

Don’t make the mistake a new CPO made a few years ago, when he launched right in to a technology implementation – without the benefit of an agreed-upon strategic role, with the right objectives and resources, and understood best practices and policies, for his department.

The starting point in any supply management transformation needs to be the overall business strategy and objectives for supply management at that company.

If, for example, your company has relegated supply management to a very tactical role, that will have a fundamental impact on your processes and technology debate. You might be encouraged to think principally of processes and tools that support the efficient processing of purchase orders, and not much else.

If, on the other hand, your company’s senior management understands the value of supply management and has given it the strategic role that it deserves, then you have a much different agenda. (see Figure below)

That’s why we say it’s all about leadership. Have you created an awareness among your executive team, and among your internal clients, about the opportunities for top-line and bottom-line improvement through world-class supply management? That’s step one.

Once you’ve created that awareness, you need to outline your vision and strategic objectives, and the transformation roadmap to get there. What are you trying to achieve in new, genuine cost reductions during the next 3 to 5 years? What are you trying to support in revenue growth? What are you striving to achieve in working capital improvements? How do you plan to get there?

These are all strategic objectives. If you develop them properly, and with appropriate stretch, you are going to have a lot of executive support and interest in your efforts. And, that’s the first step toward being able to evaluate and select the right supply management technology and tools.

To say it another way, technology is an enabler. Enabling what is the key question. If you have strategic stretch objectives that relate directly to overarching corporate objectives (such as improving Return on Invested Capital (ROIC), and Earnings per Share), that will necessitate consideration of a certain type of enabling toolset. If your objectives are ill-defined, or tactical, don’t expect to get a lot of support from anyone (executives, finance or IT) for spending money on new technology.