10 Step Procurement Transformation

How Do You Transform A Procurement Organization?

By Charles Dominick, SPSM

Your procurement organization is expected to continually
deliver more and greater value to your company, but how? This
step-by-step guide will help you transform your procurement
organization into a world-class operation. Best of all, these
steps can work for anyone, irrespective of department size or
industry!

1. Define the Scope of the Procurement Transformation - What is
going to be different a year from now? Your organizational
structure? The technology used? The supply base? What
else? Make sure your goals are aligned with senior
leadership's expectations for the transformation.

2. Establish a Baseline of Your People, Processes, and
Technology - How many of your people are degreed or have
professional certifications? What percentage of your spend
is under contract and how is your contract compliance?
Document key findings and statistics of the current state to
help assess the future progress of your transformation.

3. Conduct a Gap Analysis and Develop a Transformation Plan -
Prioritize the transformation initiatives on your plan by
effort and impact. Target easy wins first to build momentum.
Removing trivial annoyances such as ill defined category or
contract responsibilities will help you to quickly gain the
trust of the procurement team.

4. Develop Key Stakeholder Relationships - Review your
procurement transformation plan with key leaders to garner
support and ensure organizational alignment. Seek their
feedback on potential roadblocks. Be sure to discuss
intended benefits of changes to organizational structures or
company policies first, to avoid hitting a barrier later.

5. Set Service Level Expectations - Avoid over promising at this
point as you could lose credibility and support that is vital
to success. Convey that service levels may decline briefly
before increasing dramatically. Gain alignment on the

transformation methodology you'll use, rather than arbitrary
dates.

6. Define Performance Metrics - Metrics are needed to assess
transformation performance against goals. Choose published
metrics whenever possible. Comparisons against credible
sources (e.g., NLP, CAPS, Hackett, etc.) can help evidence
your success as well as identify areas for improvement.

7. Structure Your Organization to Support Transformation - Fully
centralized procurement organizations are not the right
answer for every company. Consider the geographical and
Business Unit needs as well as the complexity of the goods
and services being sourced before deciding on the final
organizational structure.

8. Develop Standardized, Optimized, and Documented Procurement
Processes - Detailed, yet understandable documentation is
essential to the survival of your transformation. Without
it, your hard work can quickly become undone as old habits
return. Involve key "influencers" in process improvements
to avoid transformation rejection.

9. Create Policies to Support Transformation - Policies should
clearly state who in the organization is allowed to commit
company funds and what process has to be followed to do so.
Limit the number of authorized agents and establish clear
spend limits to reduce maverick buying.

10. Continually Review and Refine - Review your original goals
and progress made with key stakeholders after 90 days and
at least twice per year thereafter to ensure continued
alignment. Refine your procurement transformation plans
and keep the focus on continually increasing the value
delivered.