How does Procurement Transformation Drive Sustained Procurement Outcomes?

What is Procurement Transformation?

Procurement transformation or procurement digital transformation refers to the evolution of procurement from a tactically focused function to a more strategic and business-focused function. This shift is necessary as procurement departments are tasked by management with new strategic duties. Procurement teams are expected to drive value, achieve sustainable results, and help businesses maintain their competitive edge despite market shifts and supply chain disruptions. 

There are several drivers that can motivate organizations to undergo digital procurement transformation. From reduced costs to improved efficiency and effectiveness, transforming procurement enhances the organization’s overall performance.

For the successful change of the procurement function, the current procurement process must be assessed to identify areas that need to be improved. All the procurement activities in the organization must be thoroughly analyzed to create a roadmap for digital procurement transformation.

Once the problem areas or areas for improvement are identified, organizations can begin to implement changes to their procurement process. Procurement and sourcing transformation requires the adoption of new technologies or processes, like digital procurement solutions or workflow automation solutions for automating certain tasks in the procurement function.

In addition to implementing new technology, procurement staff also need to be reorganized and trained to better align with organizational goals.  

Effective procurement transformation requires a clear vision and a well-crafted implementation strategy. Active engagement of all stakeholders in the transformation journey is also important. By implementing changes and improvements to the procurement function, organizations can create significant value and enhance overall performance.  

Need for Procurement Transformation

Why do you need to transform the procurement function? The main focus behind any big transformation is usually improving efficiency and productivity.

Here are 4 trends that make procurement transformation the need of the hour. 

1. A radical shift in the way procurement teams work

The COVID pandemic revealed the need for transforming the way supply chain and procurement functions operate. As more teams adopt a remote-first approach, the manual and analogue processes of yesteryear are no longer relevant in today’s new state of collaboration. Digital procurement transformation helps geographically scattered teams collaborate and work seamlessly. 

2. Evolving business demands and role of procurement

The ever-evolving business landscape and customer demands, drive procurement teams to deliver more with less. Moreover, procurement teams are expected to perform as strategic, value-creating business partner that contributes to improving business agility, financial visibility, and process resilience. 

Rapidly changing processes and archaic manual work methods – According to a 2022 survey by Amazon, the biggest procurement issues experienced by B2B buyers were:

• Reliable delivery
• Maintaining compliance with spending policies 
• Complex purchasing systems
• Complex approval process
• Time-consuming invoice reconciliation

Almost all of the above issues are due to complex and disconnected procurement processes. Such issues highlight the need for digitizing and automating purchasing and procure-to-pay processes with a software solution that offers management controls, automation, and data analytics. 

3. IT and developer shortages

Dependence on IT teams is a perennial problem in organizations. From code development to fixing software bugs to resolving service requests, the IT team plays an indispensable role. Requiring IT support for solving issues in large, complex procurement processes can be quite a challenge owing to the ongoing shortage of IT resources. Automation of repetitive tasks in the procurement process can be a relief for the IT, so they can focus on more important issues. 

4. Sourcing risks and vulnerabilities

The sourcing function in supply chain management is facing several risks and vulnerabilities owing to siloed and manually operated processes, disconnected departments, and broken communication between suppliers and internal teams. Sourcing transformation is needed to alleviate the pressure on supply chains and resolve any interruptions that arise along the way. 

Creating the Procurement Transformation Roadmap

Successful procurement transformation requires a well-planned and laid-out transformation roadmap that enables a smooth and comprehensive overhaul of legacy processes and systems.

A procurement transformation roadmap guides the team through the transformation by helping them determine and define clear objectives and benefits, resources required for transformation, and a timeline for the transformation. A comprehensive roadmap also equips companies to address the key elements involved in the transformation – people, processes, and technology. 

Here are a few questions that you need to consider while planning digital procurement transformation. 

• What does the company or procurement want to achieve through this transformation?

• Why is the transformation important? 

• What are the short-term and long-term benefits of procurement transformation?

• What is the financial impact of this transformation?

• How will other departments be impacted by this transformation?

• What are the resources required for the transformation?

• What is the total cost involved in the process?

• Is the procurement team aware and equipped to handle these changes?

• What is the timeline for the transformation?

• What will be the execution pace and structure? 

• How will exceptions or bottlenecks be addressed?

• Will any skill or knowledge gaps arise during/after the transformation? If so, what is the plan for reskilling the team?

• How will the changes be managed and updated for the team?

• How can the existing inefficiencies in the process be addressed by transforming procurement?

• Are all required procurement processes included? 

• How will process changes be managed and shared with the teams?

• How is the existing tech stack performing? 

• Are there any disconnects between current technologies and applications that are impacting process efficiency and performance? 

• How will the technology changes address the above disconnects and issues?

Once you have clarity on all of these questions regarding procurement transformation, it becomes easy to create a solid procurement transformation roadmap. Only when you are completely convinced about the effectiveness of the transformation, can you present it to the leadership. While presenting the final version of the roadmap to the leadership, make sure you include – 

• Long-term and short-term optimization benefits
• ROI
• Impact on Organizational Structures and Systems

Building a Resilient Procurement Transformation Strategy

Coming to the most important and exciting part of digital procurement transformation is building a resilient procurement transformation strategy. Once you get the go-ahead from the leadership to implement the digital transformation of the procurement function from the leadership, you can start moving forward in the journey of digital transformation.

Here are some tips that will help you build a resilient procurement transformation strategy. 

1. Evaluate the current roadmap

With business and procurement needs changing at the drop of a hat, it is best to be flexible with the procurement roadmap. The roadmap that made sense 6 months ago may not hold water today. By evaluating the current procurement roadmap, you gain a better understanding of the current state of procurement in your organization, what are the changes/improvements that need to be made, and how to improve collaboration and communication between stakeholders.

The roadmap must adequately meet and fulfil the needs of stakeholder and supplier engagement, timelines, problem resolutions, technology, people, and processes. This step is not only integral to achieving both procurement and business goals but also ensuring that the procurement strategy aligns with the procurement transformation roadmap. 

2. Define the procurement strategy

The procurement strategy is the compass that guides the procurement transformation roadmap. Once you have evaluated the roadmap and determined that all the procurement pillars are aligned in the right direction, you can define the strategy. You can use the questions listed in the above section as a guide to define the procurement strategy. 

3. Align the roadmap and strategy

The roadmap is merely a compass that helps you navigate through the transformation, you need to align it with the strategy for effective procurement transformation. A clear or defined procurement strategy must be aligned with the roadmap, and any gaps between the two must be bridged. 

What Does Procurement Transformation Entail?

Any business transformation involves a range of activities and initiatives that need to be designed and defined well in advance. A well-planned and implemented procurement transformation can improve the way an organization procures goods and services.

Some of the activities in procurement transformation include – 

Bringing in digital procurement elements

The first step is to replace legacy systems and processes with digital systems. Paper-based, manual procurement processes need to go and electronic systems need to be brought in to track and monitor procurement activities more effectively. Digital procurement systems increase transparency and accountability in the procurement function.

Embracing new sourcing strategies

Procurement transformation may also involve sourcing transformation. New sourcing strategies help organizations identify new suppliers or negotiate better prices for goods and services. The total cost of ownership (TCO) analysis proves to be useful here in identifying the true cost of goods and services or for conducting a supplier analysis. 

Implementing new processes and procedures

New processes and procedures breathe fresh life into archaic procurement functions. Automated procurement workflows, for example, help streamline and improve the efficiency of the procurement process by automating repetitive tasks and eliminating redundancies. New automated processes can also be implemented to approve or track purchases so that approvals and payments happen on time. 

Training and development

Of the 3 pillars of procurement, people are the most important. Successful implementation of procurement transformation requires complete buy-in by the staff. They need to understand the changes and their impact so that they are prepared. Any new technology or process that is being added to the procurement function must be thoroughly understood by the staff, and they must be comfortable using the tool/technology. For this, adequate training must be provided to the staff so that they can carry out their duties effectively. Training on new technologies and organizing ongoing professional development opportunities help the staff keep up with the changes. 

As with any transformation, you need to plan, implement, monitor, and evaluate the changes. Successful procurement transformation requires you to first assess the current process to identify gaps and scope of improvement. Once a transformation roadmap is built, changes must be implemented in a phased manner. As and when changes are made, they need to be constantly monitored and evaluated for their effectiveness. 

Some of the points to bear in mind while implementing procurement transformation are- to define requirements clearly to avoid any chaos during implementation; to implement the digital transformation in phases; to ensure that staff is aware of the new changes. 

Process Automation and Procurement Transformation

Technology plays a key role in digital procurement transformation. In fact, it is the enabler of transformation. Procurement transformation not only maximizes the team’s capacity to deliver optimal results, but also maximizes competitiveness, business agility, and procurement process resilience. The right technology can accelerate this transformation and help businesses make the most out of the digital transformation of procurement. 

A key part of procurement transformation is implementing new technologies and optimizing exciting stacks to address any value leaks and to future-proof the procurement process. Business process automation (BPA) is one of how you can enable procurement transformation. BPA enables procurement transformation by streamlining, automating, and orchestrating complex, and evolving procurement processes. 

Most of the process automation solutions available in the market offer an easy-to-use visual interface that can be used to set up process workflows within minutes. Such software makes it easy for procurement teams to take up technical work like designing, optimizing, and automating people processes technology or tasks, without any technical background. 

Applying this layer of technology to procurement transformation makes it easier to enforce supplier compliance requirements, simplifies KPI reporting, improves process monitoring and forecasting, extends the capabilities of existing apps, and reduces errors and delays. Most of the procurement processes like purchasing, sourcing, source-to-pay, procure-to-pay, and PO approval, can be effectively automated by process automation.

How Does Procurement Transformation Benefit Your Organization?

Procurement transformation when done right can add value to the procurement function and the organization as a whole in several ways. Some of how digital procurement transformation benefits your business are:

1. Cost reduction

Streamlining the procurement workflow and identifying new ways to reduce costs, help save time and costs in the purchasing process. Cutting costs on goods and services purchases can be useful for teams that operate on a tight budget or are looking to improve their bottom line. 

2. Better efficiency

The efficiency of an organization’s procurement process can be greatly improved by transforming procurement processes. Automating repetitive and low-value procurement tasks that do not involve intuitive decision-making, can reduce the time and effort invested in the procurement process. Purchase approvals, PO approvals, or Invoice approvals can be done on time and more accurately, which improves the overall efficiency of the procurement function. 

3. Motivated procurement team

Working on high-value, strategic tasks is what every employee looks forward to. Rote tasks like PO approvals or 3-way matching are important but are labor-intensive. Spending too much time on such tasks can be demotivating for procurement staff. When you transform the procurement function by introducing new technologies and streamlining processes, procurement staff gets to work on more important tasks. This makes them feel more valued and motivated. 

4. Improved productivity

Procurement transformation relieves the staff from performing mundane tasks and lets them focus on tasks that add value to the business. When they spend more time on strategic initiatives, the productivity of the procurement function automatically improves. 

5. Enhanced quality

Procurement transformation can also help organizations to improve the quality of goods and services that are purchased. Transforming the procurement function helps set more rigorous quality standards, which ensures that organizations are getting the best value for their money. 

6. Increased transparency

Automating the procurement function improves the transparency within the procurement process. By introducing new technologies or processes, tracking and monitoring procurement activities becomes easier. When you can track processes better, transparency automatically increases, and the risk of corruption or fraud decreases. 

7. Improved stakeholder relations

Procurement transformation improves the efficiency of the process. Procurement tasks are executed faster when key tasks are automated. Relationships with stakeholders can be strengthened and improved significantly by adopting more sustainable and ethical procurement practices. The commitment towards social and environmental responsibility is demonstrated better when you automate the procurement function. 

Successful procurement transformations can result in sustainably faster processes, better risk management, higher quality output, and less expensive goods and services. It is a good idea to implement the transformation in a phased manner for better results. Rather than implementing procurement transformations on a large scale, phased implementations are easier to monitor, control, and measure. 

Transform Your Procurement with Cflow

Cflow is a no-code process automation solution that enables quick and effective automation. Digital procurement transformation is a breeze with Cflow. The visual workflow builder helps procurement staff create custom workflows by simply dragging and dropping workflow elements as per the unique requirements of their procurement function. The powerful rules engine enables workflows to move smoothly from one stage to the other.

Conclusion

Procurement transformation is required to unlock the business potential that will not only help the business survive but thrive as well. Process automation is a fool-proof way of transforming procurement processes for better efficiency and productivity.

Cflow makes it easier for businesses to secure their procurement transformation journey. This way the transformation process is simplified as well as efficient. Are you interested in exploring Cflow? Sign up for the free trial today. 

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