Procurement has the potential to provide significant benefits for businesses that extend far beyond only P&L impact. The events from the last year and a half have proven that capturing non-financial performance is also becoming a central priority for procurement.
The only way procurement will become a valuable partner is by engaging in the business’s more strategic goals. While it is still necessary to track savings, this metric is no longer sufficient to demonstrate procurement’s value.
It’s exactly what Dr. Elouise Epstein points out in this whitepaper , “Procurement needs to throw cost savings out the window…If you’re the leader of Procurement, the only way to track your progress on that is through Procurement Performance Management. The reality is that this is Procurement’s path to relevance at the board level. It’s that simple.”
I have seen many procurement teams who lack the tools they need to support their role of strategic partner within the organization. Unfortunately, procurement often lags behind in terms of strategic technology deployments. Compare this to Sales, HR – all of these functions have very established technologies and KPIs that have helped them become accountable to top management.
I believe that you cannot grow as a function if you don’t have a basic view of what you’re doing in terms of your activity and contribution. When you are a Fortune 500 company, running your business in a spreadsheet cannot work. To truly become an essential, integrated function, Procurement must move beyond simple savings tracking, and shift its focus to Procurement Performance Management, supported by a comprehensive digital transformation.
Achieve True Digital Transformation
The truth is that digital transformation goes beyond simply buying a tool and giving it to users. I have worked with many organizations using various procurement tools, but they lack complete adoption. They spend enormous amounts of time and money to implement something they barely use.
If you really want to achieve digital transformation, you must give procurement teams tools they will use as a collective and that supports all procurement activities.
I’ve also noticed that a majority of these organizations have only managed to link together disparate platforms, resulting in multiple, incoherent and incomplete versions of the truth.
True digital transformation only occurs when solutions really talk to each other, support crucial visibility into all procurement activities and are fully adopted by the organization. And that process begins with accountability and Procurement Performance Management.
Embrace Procurement Performance Management
More and more, the organizations want to move beyond simple savings tracking. To truly provide value, procurement needs to be able to show how they are contributing to business goals, which you simply cannot do by tracking savings in Excel or SharePoint.
Your ability to embrace a real Procurement Performance Management(PPM) approach is rooted in your digital transformation, by relying on tools that can support you in structuring your activity, goals, ambitions and results. These need to be laid out in a clear and repeatable way so that you can then provide transparency to your CFO. Once they understand your numbers, then you’ve built common ground. This is why I consider PPM to be so vital; it delivers a single source of truth. True procurement digital transformation means adopting tools that allow for measurement of these types of goals.
Promote Collaboration with Data-Driven Discussions
I often hear from procurement departments that despite their frequent interaction, they aren’t particularly successful in building effective collaboration with some of their stakeholders. I truly believe that gaining trust starts with understanding and anticipating stakeholders’ needs and business constraints so that you can have the right conversations.
If we want to truly break down barriers and departmental silos, procurement needs to provide trusted metrics:
- This all begins with solid data.
- Data-driven discussions are critical for the developing maturity of an organization.
- Building relationships is a key part of getting finance and the C-level to understand what value procurement is bringing.
We need to be able to clearly quantify this value by measuring procurement’s overall performance.
Procurement Performance Management elevates the role of procurement because it allows for financial measuring, but also quantifies other value-adding contributions. Procurement departments must embrace non-financial performance, such as contributing to ESG and CSR efforts, reducing carbon footprints, and risk mitigation issues.
These topics are at the top of the agenda for corporate boards and are real opportunities for procurement to position themselves as strategic contributors.
Pierre Lapree is CEO and founder of procurement performance management software provider Per Angusta.
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