Ten ways to make procurement teams more effective
Improvements in procurement can be a powerful - though sometimes underrated - way to improve an entire business. Supply chain consultants ArdentPartners’ CPO Rising 2019 study found that, for each dollar allocated to the procurement department, a typical company saves 6-12% more in the next business cycle. That’s a strong case for Chief Procurement Officers (CPOs) to receive more budget and authority. But that process starts with the procurement team - identified by Deloitte’s 2020 CPO Flash Survey as critical to managing procurement in the volatile post-COVID environment.
As a CPO, how do you optimize your team? Here are a few proven practices.
1. Give them the tools for the job
ArdentPartners’ CPO Rising 2019 study found that the top two obstacles for achieving procurement targets were budget constraints and lack of modern procurement systems. Company heads need to understand that quality procurement requires CAPEX and OPEX investment in technology, training, and business transformation. And CPOs need to be ready to make the business case to management for that spending.
2. Prioritize your people
You have to put your team first to improve productivity. In Deloitte's CPO Survey 2017, 87% of polled CPOs agreed that talent is the Number One driver in procurement performance. So you need to pick a talented team, invest in training and skills development, provide the right resources, and give your team the attention and support that the Number One performance driver deserves. That also means serious internal communications, motivation and leadership to make sure the team is serious about delivering commensurate performance.
3. Enhance cash management
Deloitte’s 2020 CPO Flash Survey found that cash management was most CPOs’ chief concern - engaging some 8x more attention than in the last survey. So help yourself and your team by giving them good software tools that enable more transparent, hands-on cash management, and encouraging good cash management discipline. That should help the bottom line, and make your team look good to senior management.
4. Focus on spend data
ArdentPartners and others have demonstrated that a team which has the technology and understanding to use spend data in procurement leapfrogs into the best-in-class bracket. ArdentPartners data showed 80% of top-class teams doing this. Obviously, CPOs need to equip and train teams to do this - it’s worth the investment.
5. Engage your team in tech
Technology enablement is one of the most transformative areas for procurement, but you will get the best results if your team is behind it. Involve them in the technology transformation process, encourage them to propose ideas on their own initiative, and you’ll achieve better ROI on your tech investment. If your team seeks more training and experience in using the technology, even better.
6. Match your tech to your team’s needs
This should be obvious, but it is vital: make sure that whatever e-procurement solution you choose fits the needs of your procurement department. Your team’s needs may have to grow and evolve in line with the capabilities of the new system, but this journey won’t start successfully unless the new package supports their existing needs. Picking the right software that hits your team’s pain points will go a long way towards getting the team behind tech transformation.
7. Give your team digital experts
You may be able to bring your entire team up to speed on the latest and most useful technology, but you might find it more practical and efficient to seed your team with digital leads, with more advanced understanding of the most relevant technology, who can guide and inspire the rest of the team. If they can be the nucleus of a knowledge hub within the whole enterprise’s digital transformation, even better.
8. Invite them to innovate
Talk of continuous disruption to drive business improvement has become a staple of tech circles, but it does deliver proven results - including with procurement teams. If you can allocate time and budget for your team to experiment, try new innovations, attempt their own R&D, you’ll get a more engaged team, and a faster-moving, more intelligent procurement process.
9. Standardize routine processes
It may seem to contradict the push for digital disruption, but a team that standardizes its routine procurement tasks – often through its software tools – saves time, trouble, and expense. Once again, ArdentPartners data shows 80% of top-class teams doing this. So should yours.
10. Consolidate your suppliers
Does your team systematically analyze your vendor roster to optimize your supply relationships? If they don’t, then the new transparency and analytics provided by tech-enabled systems are an excellent way to get them into this discipline. After all, they're usually the interface with the suppliers. You can end up with a consolidated, rationalized supplier list that delivers far better value, and is far easier for your team to manage.