Just like people, Procurement organizations are at different points on their continuous improvement journey. People rely on friends, classes, self-help books, mentors, and family to help them identify opportunities for growth and improvement. Where would a Procurement organization go to help them identify opportunities and actions required to continue on their journey?
Some companies use industry benchmarks and roundtables, or work with peers at other companies to see how they compare. But what does that really provide? A couple of data points that tell them they could be better. That probably isn’t breaking news if the questions are already being asked and it certainly doesn’t provide an actionable roadmap to sustainability.
A successful approach Procurement organizations can take to start down the road to transformation is to robustly and critically challenge the current state source-to-pay environment – often through engaging a third party to conduct an end-to-end assessment. Utilization of an external organization brings a proven and rigorous methodology, helps mitigate office politics, provides leadership with an unfiltered assessment of the current state, and provides insights into the maturity level of an organization when compared within and across industries.
An effective assessment will look at people, process, and technology to determine the current state and to develop a plan for improvement. The linkage between these three aspects is critical and an assessment needs to analyze all three in order to create a sustainable transformation. We have worked with many clients who have “implemented” various procurement processes only to find out that they didn’t have the right people skills to execute. Similarly, we have also seen many companies implement source-to-pay technologies without the underlying processes required to maximize the investment.
The end result of a Procurement assessment should be an actionable roadmap and detailed business case to direct you on your journey to be “best in class”.
If you decide that a procurement assessment is the right next step for your organization – what can you expect?
Nitor would assess your Procurement organization utilizing our 8 Element framework – this covers the eight main aspects of procurement:
- Spend Analytics
- Category Management
- Strategic Sourcing
- Supplier Management
Nitor utilizes several activities to complete an assessment:
- Data Gathering – For each of the 8 Elements, we gather as much information and data about your organization as possible including:
- People - Global footprint, organizational structure, FTE breakdown by activity, job descriptions, skill assessment, and training programs.
- Process - Current state process and policies documentation, key metrics, spend data, payment information, and supplier performance data.
- Technology - Review the various technologies currently in place to enable each of the 8 Elements.
- Voice of the Procurement / Customer – Through utilization of face-to-face interviews and on-line surveys, we gather feedback from people within Procurement, Legal, Accounts Payable, IT, and the stakeholders / internal customers in the organization. This “self-assessment” provides us with vital feedback and information used in the review of the current state. Often, the biggest challenge, and surprise, during this phase is determining the actual number of people performing the 8 elements of procurement throughout the organization - there are usually significantly more people doing procurement activities than you think!
- Analysis – After gathering all of the data and voice of the customer (VOC) feedback, we analyze the information against each of Nitor’s 8 elements to determine where your organization is against various macro and micro benchmarks. The maturity level for each of the 8 elements are assessed as either emerging, average, or best in class. Our goal is to understand both where you think you are as an organization and where we think you are when compared across industries.
The depth of the analysis is important to keep in mind when looking to conduct an assessment of Procurement. We review each of the 8 elements at 3 progressively deeper levels:
- Gap analysis to specific micro benchmarks
- Heat map of the main activities that are the foundation stones of each element
- Heat map of the tasks that form the building blocks for each main activity within an element
This depth of analysis is not only critical to building an actionable transformation roadmap but also begins the journey of learning for all participants.
One important thing to remember is that it doesn’t matter where you fall on the maturity scale - it only changes the specific recommendations. For example, a company that is emerging in Strategic Sourcing, may not have a robust and consistent process in place. Therefore, we wouldn’t recommend that you implement a technology without first deploying a process throughout your organization that can then be enabled by the technology.
- Workshops – After completing our analysis, we hold interactive workshops with the appropriate stakeholders to review our findings. Our goal during these sessions is to debate and align on the findings. One of the main drivers of conversations is your self-assessment results compared to our assessment. In some cases, the gap is wide and creates healthy debate and discussion. There have also been engagements where there is general agreement in your self-assessment and our assessment. During the workshop, we use various tools and methods to draw out viewpoints and drive discussion around current state. The end goal is to close the gaps on the differences between the self-assessment and the Nitor assessment. After agreement is obtained, we lead discussions on the future state and roadmap to improve the organization.
- Recommendations – At this point in the assessment, we have gathered the information, feedback, and consensus needed to develop recommendations around people, process, and technology actions to move your organization forward on the procurement journey. We provide in-depth actionable recommendations within each of the 8 elements including organizational structure, process development and deployment, technology selection and implementation, training, change management, mission statement and KPI’s.
- Roadmap and Business Case – After agreement on recommendations, we develop a detailed business case to justify the procurement transformation. This associated roadmap provides a sustainable path for execution. It is important during this phase of the process that we understand budget and resource availability to ensure the roadmap is attainable.
While the process used to assess an organization is in-depth, the results have proven to be worthy of the time and effort. Organizations that have taken our recommendations have achieved a return on investment from the transformation ranging from 300-800% and are driving forward on their procurement maturity journey.