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As digital becomes more prevalent, it’s imperative for procurement to evolve from its legacy back-office role to that of a strategic function
By adopting the Next Generation Operating Model, procurement can make this strategic shift with ease
The model along with four key enablers including strategic category management and technology accelerators can help procurement in this transformation
An average company spends 40 to 70 percent of its revenue on purchases from third parties. This is a clear indicator of how critical the procurement function is to the success of a business. However, is cost saving the only value procurement can add? More importantly, is cost saving alone sufficient in the face of supply chain instability, emerging technologies and evolving trade policies?
A survey of Chief Procurement Officers shows that only 1 in 4 procurement leaders feel they have business partners delivering strategic value. Further, 65 percent had limited or no visibility beyond their Tier 1 suppliers. Hence, there’s a pressing need for a quantum shift in the way procurement operates and measures its impact.
WNS-Denali’s Next Generation Operating Model can help companies steer their procurement functions from the traditional back-office role to that of a valued partner at the decision-making table.
The transition, however, can neither happen overnight nor without setting the right goals and planning. In our decade-long process of co-creating this operating model with a Fortune 50 company, we have identified four key enablers required to implement this transition.
At the heart of the transformation is the shift that procurement has to make from being reactive problem solvers to proactive solution providers. This is not possible without category managers aligning with the business, understanding strategic priorities and building relationships with stakeholders. When category managers proactively reach out to the business, they begin to demonstrate value and finding a place at the table will become easier.
Building a Center of Excellence (CoE) can help category managers develop the required skills. The CoE can provide the necessary support such as tools, methodologies, templates, market intelligence and coaching.
On any given day, procurement functions are inundated with queries and work requests. As procurement transitions to operate more strategically, it is critical to find an effective way to service internal and external stakeholders.
Setting up a centralized procurement desk can help channelize the requests to various specialist teams such as:
The digitization of transactional and repetitive procurement activities is a low-hanging fruit for organizations as it will release the bandwidth of resources for more proactive, strategic planning. Further, digitization can help identify patterns, norms and trends leading to a procurement playbook. Supply chain management is experiencing a quantum shift because of emerging technologies such as internet of things, artificial intelligence and advanced analytics. Adoption of these technologies, while critical to the new-age procurement operating model, should be planned well. It is necessary to define the overarching vision and strategy, and evaluate how technology fits into the roadmap.
The final piece of the puzzle is the actual re-organization of the procurement function into the new operating model. It is a myth that technology by itself will be enough to integrate all processes. Putting together the right team, getting executive sponsorship, ensuring alignment with the vision and finding collaborative external partners are also critical success factors of this transition. Another common mistake is to expect quick results. It is necessary to plan for adequate time required for the new model to mature and assimilate into the organization’s new way of working.
In short, the Next Generation Operating Model along with these four enablers will help procurement move out of the back-office and get a seat at the decision-making table.
To know more about the Next Generation Operating Model, read the WNS-Denali Whitepaper.