What’s Holding Back Procurement Transformation?
The role of procurement is at a crossroads. While some companies have maintained value-driven procurement teams at their companies for years, other companies are still attempting to create the type of procurement organization that focuses on transformation rather than pragmatic objectives like achieving savings.
Even some mature organizations are struggling because they’ve already taken care of all the "low-hanging fruit” in procurement. They struggle to adopt new and innovative technologies, and they lack the talent to implement and synchronize new solutions.
Here, we’ll explore why procurement transformations stall out and what we can do to resolve the problem.
Lack of Buy-in from Senior Leadership
Many procurement transformations struggle because senior leadership hasn’t signed off on critical investments or new programs. According to the 2023 ProcureCon CPO report, sponsored by GEP, 40% of procurement leaders said a lack of buy-in from key decision-makers was a significant challenge to their goals.
This can occur due to a lack of communication, or it could be because procurement teams are unable to acquire sponsorship for their key initiatives.
To acquire buy-in from senior leadership, procurement teams must communicate effectively, highlighting the potential contributions of transformation initiatives to the organization's growth. They should also conduct thorough research, presenting data-driven analyses to support their proposed initiatives. By demonstrating the potential returns on investments, procurement teams can build a compelling business case that outlines the long-term benefits of procurement transformation.
Procurement teams must also investigate creating a comprehensive procurement policy that will align with the company's overall goals. This will not only provide standardization but also enable the procurement team to demonstrate its value to company leaders. By using innovative technologies, procurement teams can create efficient procurement processes, which in turn will drive cost savings and boost operational efficiency.
Unclear Goals and Objectives
Another common reason why procurement transformations fail is that goals and objectives are not clearly defined. While it may be easy to set strategic objectives, such as reducing costs or increasing efficiency, organizations must also ensure that these objectives are measurable. Without clear and measurable goals, the organization cannot measure its progress on the transformation initiatives.
Organizations should assign roles and responsibilities to specific individuals, laying out the steps each team member must take to reach their targets. This will not only provide clarity on who is responsible for what but also ensure that everyone is working towards the same goals.
In addition, organizations should define a timeline for measuring progress on transformation initiatives. By setting milestones, teams will be able to identify areas where they are falling short and adjust their approaches accordingly.
Insufficient Resources and Talent
Transformation initiatives can also fail due to a lack of resources and talent. The 2023 ProcurCon CPO report also found that 36% of procurement leaders struggled with insufficient resource capacity.
Organizations should invest in the right technology that allows them to automate processes and take advantage of predictive analytics. They must also ensure they have the necessary skillsets within the organization, either through recruiting or training existing employees. The CPO report also found that a significant number of procurement leaders value financial analysis skills, negotiation skills, and information technology skills.
Organizations should identify what areas need improvement, then investigate the technology and skillsets required to make those improvements. In some cases, outsourcing specific tasks may be beneficial. Finally, organizations should develop a comprehensive training plan that ensures everyone is up to date on the necessary skills and processes.
Poor Internal Communications Between Departments
Finally, internal communications between departments can also impede successful procurement transformations. Organizations must ensure that everyone involved in the transformation has a clear understanding of their responsibilities, as well as what is expected from them. Additionally, organizations should provide frequent updates on progress and changes to the team, so that all parties involved are aware of any changes or developments.
Poor communication not only leads to confusion and miscommunication but can also cause teams to become siloed, resulting in a lack of collaboration between departments. To ensure successful procurement transformations, organizations must create channels for communication that are accessible to all involved parties, and there must be clear leadership spanning departments to support the initiative.
Learn More at ProcureCon Indirect East
Procurement departments need the support of the entire organization to transform. Many of these challenges seem formidable, but by orchestrating transformation initiatives across departments, procurement teams can deliver more value to the organization.
To learn more about procurement transformation, don’t miss ProcureCon Indirect East, happening from September 11th through 13th at the JW Marriott Orlando Bonnet Creek Resort & Spa. Download the agenda and register today.