10 Simple Questions : Procurement Organization Maturity Evaluation

Table of Contents

Introduction

In today’s challenging environment, business leaders are consistently looking for ways to enhance profitability and deliver bottom-line savings. In their quest for profitability, procurement can sometimes go under the radar of these leaders. Due to this, they may be missing out on tens of millions of dollars in savings every year that could be realized by establishing a strategic procurement function in the organization.

Historically, companies considered procurement to be a back-office function. These companies have typically believed that procurement’s value is limited to completing transactional tasks such as creating POs and rubberstamping contracts. In fact, in a recent survey of C-Suite executives at financial services companies, we found that this transactional, back-office view of procurement is still prevalent.

Findings from a recent study have highlighted that most C-Suite executives at Financial Services companies are unaware of Procurement’s strategic benefits.

67%

of respondents highlighted they do not consider Procurement’s role to be strategic

18%

of respondents highlighted they do not consider Procurement’s role to be strategic

We have helped companies across different industries reimagine procurement by establishing best-in-class processes and tools. We provide tailored solutions for each client to help them achieve all their business goals. Typically, we start our engagements with a current state assessment as a part of which we evaluate the procurement maturity of the client and leverage our findings to design a future state that enables them to maximize value, reduce risk, and fuel innovation. Our expertise in procurement strategy & operations allows us to deliver strategic solutions that optimize procurement practices specifically tailored for the unique needs of companies across multiple industries.

Ask yourself these 10 to find out how mature procurement organization

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  • Termination for convenience
  • Data Reporting
  • Termination Assistance
  • Limiting Automatic Price Increases
  • Data Ownership
  • Insurance / Indemnification clauses

If your answer to most of the 10 questions listed above is no, or you are unsure of the answers, the procurement operations maturity of your organization is likely to be low. This means the role of procurement strategy at your company is highly transactional and you’re leaving a significant amount of money on the table with your third-party suppliers. A procurement transformation program can help evolve your procurement function to a strategic value creator which can not only reduce your third party spend, but also help contain risks.

Our experience of working with companies such as manufacturing, finance, retail etc. for years has demonstrated sustainable benefits that are not limited to bottom line savings.

We understand the unique challenges and requirements of procurement strategy & operations and have successfully helped our clients achieve significant improvements in their procurement practices.

Characteristics of a Sophisticated Procurement Organization

People

Experienced and skilled procurement strategy team with strong negotiation and sourcing skillsets

Tools

Best-in-class RFP templates, negotiation toolkits, contract terms & conditions

Strategic Involvement

Systematically involved in all purchase decisions in early stages to enable strategic decision making

Process

Standardized procurement strategy processes for all spend categories with cross functional involvement from Business, Procurement, Legal, IT

Procurement Maturity Drives Sustainable Strategic Value

Low Maturity

Limited efforts to reduce spend with 3rd party vendors

Lack of pricing benchmarks to guide vendor negotiations

Existing partner relationships play a major role in awarding new projects

Strategic plans are finalized without procurement input

High Maturity

Specific, planned initiatives to reduce costs with 3rd party suppliers

Negotiations scripts and templates, with benchmarks to guide negotiation efforts

New projects are bid out to the market, and awarded to industry-leading vendors

Procurement objectives are aligned with a company’s corporate strategy

By establishing a best-in-class procurement strategy, companies can realize a multitude of operational benefits. This includes mitigating third-party risks systematically, as well as creating collaborative relationships with third-parties that foster innovation. These measures, in turn, lead to a positive impact on the top line and more satisfied end-customers.

Author

Managing Partner and Co-founder (US)

Ian brings deep expertise in Sourcing, Procurement and Third-party Risk Management. Ian is a leader in the firm’s Financial Services vertical and leads strategic sourcing and outsourcing programs across multiple geographies.

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