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 modernisation movement within procurement that’s transforming its position and its future.
Procurement needs a new operating model and a new perspective, focused on aiming to maximise 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.
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, digitisation and a business-driving strategic outset, procurement can stay ahead and continue to evolve – for the good of both business and customer.
How future-ready is your procurement team?
5 key points to consider in ensuring future-focused procurement.
An agile function
We can help accelerate implementation, enabling flexible changes to core processes – like replacing a supplier or introducing an open-book policy in the supply chain.
A new role for procurement
Are your purchasing and supply managers empowered with insights to fully understand the results of their work on the end-product and/or service – and on the user and customer? This allows you to assess the value procurement is adding to the business; gaining respect across the company.
Do your structure and processes allow for smooth, fast and reliable decisions, even in stressful circumstances or where time is of the essence? These resistant structures protect you from external shocks, structural breakdowns and disruptions by applying stress tests and supply chain risk management tools.
Partners as peers
Ensure you work collaboratively with suppliers. This ensures a clear view of data, and the agility to work closely with our partners, we can ensure success over the short, medium and long term – even in the most uncertain times.
A global-local balance
Do you procure and employ locally, while also developing and utilising value creation and ecosystems within our local economy? Combining globalisation with localisation forms an enterprise-specific balance, taking into account economic effects along with cultural and sustainability considerations.
For a range of reasons, it can be both unsettling and confronting for an organisation 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.
Financial services procurement case study
We assisted a leading financial services client who needed to redesign their procurement approach.
Our client 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 organisations, 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.
KPMG's procurement services
KPMG helps clients with procurement and supply chain services.
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