September 8, 2021
The pace of innovation in the past decade has been phenomenal and has disrupted the way we address traditional functions in organizations, including procurement.
In his book “Thank You for Being Late – An Optimist’s Guide to Thriving in The Age of Accelerations,” Thomas Friedman poignantly reminds us of an era where technology is changing faster than we can adjust. “The world’s ability to change outpaces our ability to adapt to that change. The world changes at an accelerating pace, while humanity adapts at a constant pace.”
In this era of constant change, technology no longer follows Moore’s Law and the speed of transformation is being determined by the speed of technological innovation. Because of this, we need to reflect on how we harness this velocity of change to not only disrupt the way we think, but to build in a way that benefits our customers – aka “the end user.” It may be a good idea to revisit the basic foundational blocks of sustainable change. The key principles remain the same but are catalyzed by new innovations.
What is important in this context is to focus on how centralized procurement functions have evolved. Procurement’s function has grown into a strategic driver within the organization that directly impacts the growth of the firm and its revenue. A sustainable procurement structure would require foundational functions that enable procurement to grow with the needs of the organization.
So, what are the basics that we need to focus on?
1. Understand the Problem Statement
- You can have the best solution to a wrong problem. We live in an era of complex problems with multiple variables. It is imperative that procurement functions are represented and voices are heard. Procurement is no longer a back-office function. A problem in management manifests itself into the procurement lifecycle that can lead to delays in the requisitioning process, contractual agreements, third party risk and performance. A holistic solution starts with a comprehensive assessment of the problem. Technology can connect the dots for us in creating a heat map to guide to areas of impact, but the data collection and assessment is still a human activity that requires more depth in areas beyond traditional procurement topics.
2. Empathize with Your Audience
- Procurement organizations still have siloed approaches in the functions that they perform within the procurement lifecycle. It is imperative that we construct bridges for them to cross over to disrupt that model. For example, supplier risk management has multiple entry points and multiple considerations. Segmentation of tiered suppliers, due diligence at onboarding, contractual obligations, and continuous assessment of performance with compliance are a few examples. The synergies within departments may not be communicated, but we need to seek them and connect the functions upstream and downstream for an effective solution that addresses the full lifecycle of enterprise risk.
3. Construct a Solution That Makes End User Lives Simpler
- The user journey is key to adoption. How often do we look at an operating model and consider the user journey at the same level as addressing compliance? User journeys are becoming involved as procurement technology evolves. A clear understanding of how a centralized procurement organization interacts within the entire source-to-settle lifecycle is key to platform adoption and growth of the functions. We need a macro view of the entire workflow to understand the hand-offs and identify gaps in communication. Then, we need a micro view of various functional journeys like a COE to understand how the work expected of the “end users” can be achieved.
4. Do Not Forget the Human Equation
- Your organization will continue to grow in areas such as: Supplier Relationships (onboarding, contractual, performance)Third-Party Risk Needs (sustainability, environmental, reputational)Procurement Categories (segmentation, sourcing)Contractual Obligations (standardization, performance)Product Development (indirect, direct)Mergers & Acquisitions (consolidation, standardization)Technology Footprint (cloud infrastructure, platforms) Invest in upskilling your staff in the needs of the future early in the transformation cycle so that they are ready to take on the procurement challenges of the future.
5.Provide an Exit Strategy That Builds Upon a Foundation for Growth
- Platform-enabled solutions have gotten more complex to maintain. This is also particularly resonant as we move from S2P solutions into supplier relationship management, advanced contracts management and third-party risk. The platforms are no longer point-in-time build outs of solutions, but the technology customers inherit needs to grow with the needs of the procurement functions. The investment in training your support organization for both maintenance and growth needs to start early in the implementation process. Ensure that you invest in a supplier enablement strategy and resources for a successful execution post deployment. This can be the difference between a successful realization of procurement automation and not being able to achieve bottom line results. Implement measurable KPIs that you can start reporting on as you gather data post implementation. We are all aware that you cannot improve what you cannot measure. Identifying measurable metrics and creating reports that can be analyzed for effectiveness of your value realization is key to course correction. The implementation of the solution is the start of the transformation and organizations need to be set up for continuous improvement post implementation.
Our clients are looking to us to not only realize value with the technology today, but they also look to us to future-proof the solutions for tomorrow.
The power to disrupt can be harnessed as a force to construct.
To learn more about how The Shelby Group can help your procurement organization adapt in a changing world, contact us at email@example.com.
By: Mo Fakhar, Managing Director