Increasingly, procurement is playing a more important role in how a business functions.
The growing focus of companies on improving return on investment (ROI) and sustainability means that procurement is a factor in more and more business departments. As such, procurement leaders are being placed under greater pressure to improve efficiency and reduce costs. The result? A greater drive for utilising innovation.
Making the most of innovations in technology and new products requires procurement professionals to implement an effective change management methodology, in order to remain agile, drive ROI, and apply new processes quickly and effectively.
The first step towards implementing an effective change management methodology is to assess your current operating process.
Traditional systems of purchasing are likely still being used, but may not be as effective as they once were. However, it is important to remember that applying change methodology is not a case of throwing out the old and bringing in the new.
Rather than wholesale system replacements, change management encourages you to build on existing processes. This is vital, as your original methods will provide you a constant against which to measure the success of any changes you make.
When assessing your existing procurement strategy, some areas of inefficiency may spring to mind immediately. In order to consider all elements of your buying, we recommend you assess each of the following areas:
- Departmental goals in relation to company ambitions: With procurement playing such a prominent role in your business, it is likely that improvements in supply chain efficiency and savings will have a significant impact on your company’s overall aims. Take a moment to assess your departmental goals and ensure they are closely aligned to existing company goals.
- Complexity of the supply chain: A major amount of time and money is used coordinating suppliers, so ensuring your supply chain is as streamlined as possible is a crucial first step in your assessment. The average UK business loses nearly £90,000 a year as a result of payment friction, so cutting the number of suppliers you use could be a quick way to achieve a more efficient procurement strategy.
- Sophistication of internal digital technology: Alongside reducing the number of suppliers in your chain, adopting a digital procurement platform can help you reduce payment friction through automation. Assess whether your current systems for repeat orders and supplier payment are still manually handled or, if you’re already using a digital platform, determine whether it has been optimised recently to provide the greatest efficiency.
- Staff expertise and opportunities for training: Implementing an effective change management methodology does, unsurprisingly, result in new processes. To ensure these systems are effective, procurement staff need the required training on how to use new technologies and how to adopt varying procurement strategies. The assessment stage is the perfect opportunity to determine whether your staff could benefit from training now, and what training techniques should be used going forward.
Don’t forget, the assessment process is not just a hunt for things that aren’t working. Take the time to identify the positives so that these can be incorporated into your new systems.
Once you’ve made your assessments, share any new procurement goals for change with your team. Achieving the buy-in from all procurement staff is vital when it comes to developing the flexibility that sits at the heart of procurement.
Making significant changes to procurement is difficult to do in isolation. Implementing new digital platforms or restructuring supply chains may require investment. Therefore, gaining board-level support is crucial when you want to adopt a change management methodology.
However, it is not just internal communication that is key when looking into new systems. How you manage and interact with suppliers will likely alter, so keeping them abreast of relevant procurement strategy changes will ensure there are no delays in your buying.
With this in mind, let’s look at how communication plays an important role with each of the relevant parties.
Change management requires constant tailoring and, as such, you will find yourself regularly tweaking processes, exploring new technologies, or sourcing alternative suppliers.
With procurement representing a significant spend, some businesses may wish to dedicate large amounts of time to consider system changes at board-level. This demonstrates important awareness of procurement, but can have the unfortunate side-effect of impeding your change management methodology.
Therefore, ensuring you are given the freedom to make changes and remove hindrances with a minimal decision process is crucial. The ideal solution is to create a change management team, headed up by yourself, that can fulfil these tasks. You’ll want to also include staff members with strong leadership, project management and communication skills.
Building a good working relationship with your suppliers is important for your long-term procurement strategy. Without these relationships, your procurement strategy risks becoming a revolving door of suppliers, leaving you unable to properly conduct spend analysis or ensure product reliability.
Communicating effectively with your suppliers is crucial to the change management methodology; without knowing how your procurement is operating, your suppliers cannot hope to adapt to it.
Furthermore, communication with suppliers should not only consider how they adapt to you but also how you work with them. Helping suppliers to identify areas where you can adapt to them provides opportunities for mutual benefits and helps you strengthen supplier relationships.
Once you have assessed how your procurement can be improved, gained buy-ins from within your business and from suppliers, and implemented the changes, it is time to look at how you sustain your new strategy.
Like the assessment stage of your change management methodology, sustainability is not about blind commitment to any aspect of your procurement, whether new or old. Instead, sustaining change management demands a promise to continually measure the efficiency of your procurement.
If you are using an up-to-date digital platform, this is made easier as a result of predictive analysis. This software gathers and processes data to find patterns in spending that help you to plan for future product demand and costs.
By selecting suppliers who use their own digital platform, you can ask them to share their own data on the effectiveness of purchasing. This can include considerations such as production speeds, storage and distribution costs, and other important considerations such as environmental sustainability.
Inviting suppliers into your business to report on their progress is a great way to determine how well your procurement is functioning. You can learn how close they are to meeting the requirements set out in their contract and identify ways to build your company’s relationship with them.
Ultimately, change methodology does not subscribe any single method for procurement excellence. Instead it accepts that, for modern procurement, the most important asset is flexibility.
While there is no comprehensive guide, there are some fundamentals upon which a successful procurement strategy can be built. Learn more about these crucial elements by downloading our free eBook, The 4 Stages of Procurement Savings.