I’ve recently been working with a state procurement team. In conversations with them, it’s become clear to me that the challenges they face are common to government procurement functions across the US. And probably beyond.
With budgets under relentless pressure, it’s no surprise to see procurement departments in the spotlight: after all, other than salaries and benefits, the cost of goods and services is the biggest expense for most public service organizations.
But as well as being a big challenge, I believe it’s a great opportunity for heads of procurement to take a lead role in driving down costs, boosting agility and adding value to their organizations. So how can they do all that?
The short answer is to transform procurement operations into performance-based centers of innovation. Getting this right (and there’s no shortage of success stories to learn from), will inspire employees, improve operational efficiency and unlock huge potential for the wider organization.
Of course, this is no overnight transformation. It requires investing in people, investing in training and changing the culture, with new digital skills, a more entrepreneurial spirit and more collaborative ways of thinking and acting. I know that’s a big ask. And it’s hard to know where to begin.
But boiling it down, I’ve learned there are three core elements to any successful procurement transformation: people, processes and technology. And they’re all inextricably linked. I’ll start with people, the most valuable asset for any procurement organization.
To attract, retain and grow talent (and, increasingly, that means millennials), CPOs need to create environments that inspire and reward innovation and progress. That means harnessing new and emerging technologies like AI, machine learning, analytics and cloud-based portals to reinvent how people work. New technologies, on their own, won’t be enough. Performance-based compensation, flexible work schedules and targeted skills development are all vital too.
To achieve the right outcomes, people need the right processes. Accenture research shows that productivity improves when there’s an increase in transparency and collaboration. And that’s backed by my experience: I’ve found that CPOs can achieve 15 percent savings by transforming their operating models.
The third priority, technology, underpins the other two. With the right investments, CPOs can provide advanced solutions in spend analytics, contract development and purchasing management. The bottom line: these technologies help procurement teams achieve more with less.
There’s one more key value lever I need to mention: suppliers. Progressive public sector procurement departments are reimagining how they manage supplier relationships. We’ve found that leaders in this space save between three and five percent more on total procurement spend than their peers.
Please contact me to continue the discussion, and follow me on Twitter @bardga. Stay tuned for my next article, which will discuss maximizing supplier relationships: The seven-step process CPOs can follow to unlock additional value from suppliers.
See this post on LinkedIn: Unlocking Procurement’s Potential