Over the years I’ve come to develop a sense of where an organization is in its procurement and supply chain journey. Usually my clients are experiencing some sort of pain or frustration, before they call me in. Perhaps having recently missed earnings or underachieved their operational goals. Perhaps a company has been focused so much on their growth that they have not attended to their operational garden. Inevitably a tipping point comes where the pain and frustration grows to such a degree that leadership can no longer ignore it. Regardless of how these issues manifest themselves, there are telltale signs that an organization should begin elevating their Procurement Excellence game before its too late.

So how do you know it’s time to embark on your Procurement Transformation journey? Begin by asking yourselves a few questions and see where those answers take you. Here are a few that I ask when beginning discussions with my clients:

• Do you have a Procurement Strategy? Most people think they have a procurement strategy but after closer reflection, we find that it’s not adequate for a high performing company. Also, if your procurement strategy was defined in a silo, with little or no input from senior leadership, it’s probably not well aligned with your overall business strategy. And that’s a real problem.
• How well are you organized around your procurement functions and activities? Across your company, procurement is happening. From those who set strategies, policies and procedures all the way to those actually buying commodities and processing PO’s and invoices. A well-established and effective procurement organization means that you’ve given thought into who is actually best suited to conduct certain activities. It also is the central function that executes on the procurement strategy, sets policies, procedures and defines roles and responsibilities. It is a shared service, a center of excellence, that alleviates the business line from activities that distract them from serving their customers. Procurement organizations deliver greater efficiencies and are more effective than employees who’s primary objective is something other than procurement. If you do not have a Procurement Organization, then it might be time to build one.
• Do you know what your spend is? This sounds like such an easy question to answer. And you may well know at the income statement level or even at the budget level. But do you really know enough about the underlying categories and commodities of products that you purchase? Can you definitively say that you are maximizing your purchasing power? In most instances, the answer is no.
• Are the products and services most critical to your business served by the most appropriate vendors? Do you have contracts in place with your preferred vendors and are they complying with the terms and discount structures negotiated? Even in regulated industries like medical devices I’ve seen clients without agreements for very important vendors. Understanding your spend also means understanding your supplier base and ensuring you are protected.

Ultimately, every journey begins with the conviction that it is time to move forward. Procurement and Supply Chain Transformations are no different. It is worth a pause from all of the immediate priorities that may surround you to consider where your capabilities are now and what capabilities you are going to need to meet your future demand. Having a clear understanding of these questions allow you to develop strategic insights that help your company reduce costs and perform better. My hope is that managers get in front of their procurement issues, so that they can control their destiny’s, and plan their own journey’s as they see best fit for their companies.

The Prokür Group is a results-driven supply chain consulting firm dedicated to realizing EBITDA growth for its clients. By combining two proven and powerful disciplines, Operations Excellence and Procurement Transformation, The Prokür Group is able to identify opportunities that other firms would struggle to uncover. Our approach can be applied both globally and locally, focusing across the integrated supply chain or at the business unit level, helping reduce labor, material and procurement costs and increasing strategic performance.

If you’ve found yourself up late at night wondering: Do I even know how much I’m spending and on what categories? Am I getting the best return on my supplier spend? Or do I have the right people, processes and technology in place to take full advantage of my purchasing power? Or are my key people distracted by burdensome buying processes and paperwork? Am I losing opportunities to reduce costs, innovate my products or services, or possibly becoming more inflexible in my supply chain? If so, read on.

Has anyone taken the time to align the corporate and business strategies with your procurement strategy? There are a lot of assumptions that are in this question. First, is that you even have a business strategy. But secondly, is that you even have a Procurement Strategy. Most companies have some sense of the business strategy, but would find it very hard to even define what their procurement strategy is. This often means, you really don’t have a procurement strategy. And that’s very helpful to understand where you are on your journey.

There are several questions you can ask yourself using a simple framework of People, Strategy, Process and Technology

Strategy: I always begin with strategy because it’s what sets your true north.

People: I start here because if this isn’t in place

• People is largely defined as Governance, Organization and People.
• Do you have a governance structure that will meeat

Strategy:

There are several different points of view that you can look at this from, but none more simplistic and appropriate as People, Process and Technology.

how well an organization is managing their procurement operations and their external supply chain. It all begins with seeing symptoms comes with seeing repetitive.

Where are you on the Procurement Curve? What’s the right way to measure maturity? (Governance, Organization, process, technology, 4^th insightful element)

Do you have a complete picture of your external spend? Do you know where all of your dollars go, and whether you are getting the value from them that expect? Do you have this suspicious feeling that your costs are higher than what your suppliers have insinuated? That’s called price creep.

Do you know which vendors are performing exceptionally, which are not?

Do you know how purchasing decisions are made? Who is making the purchasing decisions? And maybe even more importantly, who is not involved in the decision making process? Do you have a procurement organization that is equipped to be the strategic partner that top performing procurement organizations are?

Are they the right people doing the right activities? Is your leadership distracted by administrative buying processes?

Do you know what excellence in procurement looks like? And where are you on the maturity curve?

There are too many unnecessary sleepless nights. Knowing that your investments are working for you will help you rest easy.