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key factors that influence procurement transformation

Organisations are increasingly turning towards transformation of their sourcing and procurement functions in order to optimise costs and bring in efficiencies in the process. However, there are several areas that derail transformation plans even if an organisation is making gradual improvements. Here are the top six factors that ensure successful transformation of procurement function.

Foundational technologies: Timely availability of data is the key factor for procurement and sourcing activities through centralised systems or tools such as Enterprise Resource Planning (ERP). If any of the activities, which are due to be captured in the ERP or other such platform, are missed out, it seriously hampers the entire chain of operations.  

At the same time, it is imperative for organisations to implement the foundational technologies with sufficient training and development of their staff. The employees need to be sensitized and made a part of the organisational change without making them insecure due to the ongoing change.

End-to-end process ownership: Organisational models generally are centralised, decentralised or a mix of both. In spite of the type of model, there are typical expectations of governance by an end-to-end procure-to-pay (P2P) process owner:

·      It involves end-to-end managing and reporting on KPIs which support purchasing and accounts payables processes. It develops and continuously updates the end-to-end process strategy in order to ensure P2P alignment with the functional objectives of the business.

·      It helps in technology implementations and drive improvements across the P2P process to ensure end-to-end optimisation.

·      It helps in involvement and alignment across multiple operational entities in support of P2P process.

·      The accountability and improvements are enhanced as a result of end-to-end ownership.

Interplay between Strategic Sourcing, P2P and Supplier Relationship Management: Don’t over-invest in one aspect as compared to the other. For example, while neglecting the transactional aspects of P2P and development, compliance and performance management in relation to supplier relationship management, financial organisations focus on strategic sourcing opportunities to drive bottom-line savings. Data shows that if all the aspects are balanced, organisations can generate more than 10 times the ROI of other companies. Along with supporting people and technologies, it is essential to balance these aspects for successful procurement transformation.

Aid from external sources: It is important to gather valuable support in order to accelerate transformation efforts. The manifestations include benefits such as bringing external best practices, getting and setting up programme oversight, short-term resource capacity and facilitating cross-functional discussions.

It can help supplement category sourcing efforts which are the primary source for procurement transformations. It is also essential that external consulting has considerable internal resources to provide management of overall results and direction and inputs in to initiatives as well as smooth transition to internal ownership of the initiative and on-going programme post-transformation.

Identification, execution and communication of quick wins: Internal buy-in and ongoing support are essential for transformational efforts. Identifying quick wins that are in tandem with measurable benefits including those impacting the bottom-line should help in achieving trust and support from the stakeholders.

Implementing sound change management practices: The whole process of transforming the procurement function requires seamless implementation of change management practices. Effective communication is always a key to success here. The change management should be such that instils the sense of ownership amongst all the stakeholders from top to bottom and acknowledge their roles and responsibilities in a transparent manner. 

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