The procurement function provides a crucial and strategic service to the business – that much is known. But where once leaders of the function may have been challenged by cumbersome processes and structure that frustrated colleagues, there is now a modernization movement within procurement that’s transforming its position and its future.
It comes down to this: organizations worldwide are demanding seamless technology integration between workforce, data, suppliers and customers – and this principle touches procurement as much as anywhere else in the business. By transforming swiftly as commerce changes and accelerates, procurement can introduce digital experiences and updated processes that allow it to drive supplier and third-party performance, while consolidating its position as the backbone of the business.
But to get there, procurement needs a new operating model and a new perspective, focused on aiming to maximize third-party relationships, innovation, integration, collaboration and data-driven performance. It’s time for procurement leaders to be the disruptors, bring the function to life, work across siloes, and shift its reputation from cost-cutting to customer-centric and business enabling; this can be achieved with wholesale transformation that engages executives and peers, allowing procurement to take on greater strategic responsibility.
Reaching its potential
The key to unlocking this transformation lies in introducing an operating model that is agile and flexible – such as that introduced by the journey with KPMG Powered Enterprise | Procurement. This new agile model for procurement should include lean, hyper-focused structures, cross-functional alignment, efficient governance for decision making, the ability to pivot at speed, and strong, strategic, inclusive leadership.
This new approach can be game changing on many levels. For example, a new operating model, with technology at its heart, allows for more automation of low-value tasks and an increase in strategic activities such as category innovation. This in itself can foster greater performance for the business, as strategic insights are shared and acted upon across categories.
But this transformation could struggle to flourish without the right culture and team enablement – and so, the agile operating model needs agile processes. The theory is a simple one: things happen faster and more effectively if there are regular and ‘bite-sized’ collaborations between cross-functional teams. Why is this so critical? Because it brings procurement to the table at the very start, rather than later down the line. Previously, stakeholders would get to a point of needing a product or service, then procurement would research the market, request quotes, invite tenders, negotiate contracts, and execute all the other elements involved with onboarding new suppliers. By including procurement from the get-go and giving it the opportunity to be involved along the way, colleagues can function independently and, vitally, still collaborate and interact.
With a new operating model, a reinvigorated culture, digitization and a business-driving strategic outset, procurement can stay ahead and continue to evolve – for the good of both business and customer.
Not just a theory
For a range of reasons, it can be both unsettling and confronting for an organization to rethink the way they should conduct their business, especially if the process and associated enabling tools have remained largely unchanged for over 10 years. This said, through a structured framework and tested accelerators, making that change can lead to a comprehensive transformation, one that sticks driving value and delivers on the experience centricity promise.
For example, as Partner, Sourcing and Procurements Advisory at KPMG Australia, I assisted a leading financial services client who needed to redesign their approach to managing suppliers across the lifecycle. This lifecycle was from inception, to onboarding through to offboarding and engaged multiple parts of a complex business. As part of the engagement, KPMG Australia conducted a thorough review of the client’s broad supplier lifecycle function. This led to findings that should be familiar to many: a heavy emphasis on processes driven by people, and excessive handovers at every stage of the lifecycle to name but a few. The challenge was the process was not enabled through technology further complicating the issue. The proposed plan, built on years of experience, was to rebuild the function focusing on the entire target operating model spanning the service delivery model (on and offshore), process, people, governance, data and technology layers whilst driving the needs of the entire business, delivering sustainable value and meeting regulatory compliance at the core.
For some organizations, this journey could take years to come to fruition. But with the adoption of the agile function, augmented through the offshore capability enabled through technology, transformation occurred at a rapid and sustainable pace. This resulted in key milestones that drove wide-ranging process clarity, core capability uplift, transparency, value delivery coupled risk mitigation all supported by the shift to digital.
By challenging their legacy approaches and embracing new ways of working, this client’s team stepped away from the realm of simply ‘managing’ their operations and obligations, to adding new capabilities that reflected the business’s broader ambitions.
This example, along with many other KPMG Powered Enterprise | Procurement transformations, shows that given the right structure, procurement can have a positive influence across the organization balancing the value and risk equation.
Given the only constant is change, and competition is fierce, you and your organization should continually reassess your operations in an objective matter to understand the opportunities ahead whilst delivering on the strategic agenda.