Procurement improvement begins with process

This is an excerpt of the original article. It was written for the July-August 2019 edition of Supply Chain Management Review. The full article is available to current subscribers.

July-August 2019

If you’re a long-time reader of Supply Chain Management Review, you’re familiar with Larry Lapide’s “Insights” column. Typically, Larry is writing about the many facets of planning, but occasionally, he takes on a provocative topic. One year, he questioned whether it was necessary to be a Top 25 supply chain leader, especially if in your industry, good enough gets the job done.

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Two winds of change have combined to create a perfect storm around the procurement function. From one direction blows the force of innovative technologies—such as blockchain, robotic process automation and machine learning—that have the potential to unleash procurement from tedious tasks and allow professionals to focus on more strategic, value-added work. At the same time, procurement is buffeted by the headwinds of market disruption: tariffs, cyber attacks and a tight labor market. All of this means that procurement’s days in the back office are long over.

Procurement can and must act as a strategic business partner by driving process improvements, cost savings and customer satisfaction. At APQC, we find that procurement professionals understand this new reality, but are often unsure how to begin updating and streamlining their function. In years past, cost savings was the primary (and often, exclusive) measure of procurement performance. But as many professionals have learned the hard way, over-focusing on cost often creates problems downwind.

The key to unlocking more strategic procurement is end-to-end process improvement. Before you can productively measure and benchmark metrics such as cost savings, you must first assess and define processes. Establishing and enforcing consistent processes allows procurement to align with strategy, avoid redundancies and waste, increase internal customer satisfaction and drive innovation and cost savings that benefit the entire organization.

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