Why procurement doesn’t transform

Yet with so many disrupting factors facing the function, it’s difficult to know where to start in transforming to a more modern way of working that brings greater value to the business.

 Many organizations look to solutions that offer artificial intelligence or robotic process automation; but the challenge facing procurement is bigger than simply rolling out the latest digital trend: It’s time for procurement to elevate itself and start having a much wider, more strategic conversation. Helping the function to gain recognition, at board level, by delivering greater value, risk reduction and market insight that goes beyond simple cost savings.

Start building alliances across departments—particularly with finance and IT—to demonstrate the value that procurement has to offer and move beyond that of a simple transactional role.

It’s vital to get this right, with over half of CEOs saying that acting with agility is the new currency of business¹ but almost 80% of CIOs saying their digital strategy is only moderately effective, or worse.² So what is stopping the function from evolving? The KPMG Powered Enterprise team recommends five ways to set your procurement team up for change.

Often, the right measurements and metrics are not put in place up front in digital projects—but this is a critical step in aligning viewpoints of what success means. For one role it could be increased efficiencies, for another, an improved customer experience. It’s important to have a shared vision, with outcomes that everyone is clear on, and can stick to.

New and changing regulatory pressures, global political change and uncertainty, and growing consumer expectation all make for a more complex role for procurement. Not wanting to introduce new risk, it’s easy to sit still and avoid change, and focus instead on tightly managing the supply.

Adopting a cloud platform is just the first step. But it is only the first step. How can you maximize your new and more flexible platform? What systems can you start migrating to the cloud? And are you using it to quickly spin up new services, processes or reporting possibilities? Deploying cloud and then stopping at that is akin to doing nothing at all.

Procurement might be missing the digital talent and skillsets needed to take the function forward with evolved technology, solutions, and processes. Dedicated digital skillsets are required, and can be built by developing existing talent, or bringing in new specialists. With supply a challenge in the sector, consider incentives to encourage some staff to retrain where possible.

Data. It’s often forgotten about, with poor data only discovered halfway through transformation—when it’s too late. It’s vital that procurement understands where all their data comes from, and where it sits in the business— particularly given the myriad of data sources that come from working with a complex supply chain. Cleaning that data before any big business change project is critical—and, as discussed in the previous point—the right role is required to do this. Define who is responsible for taking care of data; creating a new role for a data scientist or similar is critical to this, so you can determine where the responsibility lies.

By addressing these five key areas and mapping out an end-to-end process change project, based on a pre-defined methodology and clear end-state, the procurement function can start to engage in more strategic conversations and bring more value across the business.

This goes beyond theory—it’s borne out in practice. One example is a US-based risk management and insurance services company, which had attempted to integrate its purchasing and accounts payable departments using a software solution. When this failed to provide clarity, they turned to KPMG for a cloud-based approach. This resulted in improved oversight and standardized global processes, which tripled the business’ spend under management (a key performance metric). 45% of manual invoicing was transformed to e-invoicing. And 57% of users logged into the cloud solution within the first month of its launch.

It shows that having the vision to transform is only the first step. The appropriate technology must be properly and flexibly implemented, with clear metrics for success and a steady hand upon the tiller. Only in this way can procurement be recognized as an effective function of the future that can run alongside the finance function, and IT too. Procurement must build connections across departments to break beyond its walls—unlocking more value across the business, measuring success beyond simple cost savings alone.