Most of the procurement transformations FAIL and are unable to achieve the desired results, further creating chaos in the organizations. The failure to bring change to a function, process, or organization primarily starts with too large of a vision, botched execution, and a gamut of factors despite the best intentions.
Due to the COVID crisis, there is a renewed focus on cost reduction, finding efficiencies, and putting the right payment controls in the place. Inefficiencies and financial leakages from the internal procurement processes have made the job of a CFO very difficult.
Examining successful procurement transformations, there are few things that stand out.
1) The transformation was broken down in a few short phases. On successfully passing those gates, the next phases were launched or readjusted. This way poor planning and lengthy timeless were addressed.
2) Getting the basics right before, signing up for a large enterprise solution addressing source to pay process inefficiencies.
3) Creating a strong coalition and getting executive sponsorship with effective change management
Demands and expectations within the organization to track what, where, to whom and how the procurement spend happens is a new priority. Manually managing all stages of the contract lifecycle has become time-consuming and ineffective for negotiations.
Procurement transformation can be challenging and time-consuming for an organization if not done properly.
The best way to start is with lightweight solutions that help organizations leadership visualize the spend and tool that can provide business intelligence to make the right decisions.
With spend transparency, it’s easier to prioritize and filter through a plethora of contract management solutions and modules addressing source-to-pay automation. Too much automation is neither good nor is working with broken manual ineffective processes. An organization needs to find a balance based on the maturity of the organization to accept such a change.
Once the organization has control and better governance over its procurement, it can enable monetization to address working capital requirements and better manage its financial books.
Technology solutions impacting different aspects of the source-to-pay cycle are available from sourcing strategies to vendor onboarding to purchase and PO management to invoicing and payment processing. Lean technology solutions that integrate with upstream and downstream technologies to design solutions that address procurement objectives should be a basic requirement.
The latest contract management solutions though not at the maturity level are incorporating cutting-edge technologies to lay the foundation for an intelligent way to manage every aspect of the source-to pay-life cycle. The use of smart technology in procurement solutions is adding value from influencing the content of the contracts, providing customer delight with readily available information, highlighting the areas of risk and financial leakages, and ensuring the organization can extract value through the smart repository of contracts.
Procurement processes are complex. To maximize the chances of success and to deliver Financial Optimization, Business Efficiency, and Risk Mitigation – take baby steps toward the final state of Procurement transformation.