Harvard Business review

Procurement Teams Are Moving From Cost-Cutters to Growth Enablers

By Alpar Kamber

CPOs today are taking on a more strategic and proactive role aligned with the core organizational objectivesa trend accelerated by Covid-19.

As companies around the world adjust to a changing landscape, procurement is going beyond its traditional role of cost reduction and supplier management. Increasingly, organizations are seeing procurement as a strategic facilitator of growth and business innovation.

At our organization, we are witnessing this shift firsthand. One high-tech client is reliant on critical technical infrastructure—organizational plans that require procurement to develop strategies to reduce risk exposure and focus on growth—for customer experience and business growth.

To achieve these goals, we are helping our client continuously expand and scale its data-center network to accommodate an increasing number of users and applications.

Supporting Sustainable Growth

The heart of this client’s growth strategy includes an expansive and scalable data-center network. Meeting construction timelines for data centers requires close coordination with internal engineering teams, which specify technical requirements, and a vast network of infrastructure suppliers, which fulfill those requirements.

At the center of this effort sits procurement, orchestrating supply and demand to support sustained growth. As the company’s procurement partner, we are carrying out research and analytics on the metals the construction of these data centers requires. This is helping the company contain costs by buying in advance to limit its exposure to price fluctuations in the metals market.

The improved analytics and visibility help the procurement function identify suppliers’ price hikes that are not in line with market conditions and manage supply-chain risk to increase resilience. We are also providing our client with more options for sourcing and modeling for black-swan events and other supply-chain disruptions.

A Digital Operating Model

Eighty percent of chief procurement officers (CPOs) are investing in an updated procurement operating model to meet new business demands, a recent benchmarking survey by ProcureCon and WNS Denali revealed. Notably, only 13% of large-enterprise CPOs report being satisfied with their existing model.

Throughout 2021, more CPOs focused on designing operating models that foster strategic thinking and supplier collaboration, improve business alignment, and increase the impact of procurement. In this model, organizations can separate strategic work from tactical and transactional work. This change enables procurement to be more agile, aligned, and effective.

In alignment with advancing the operating model, CPOs are intensifying investments in digitalization. Unsurprisingly, 90% of CPOs consider digitalization critical to success.

The top digital investment areas for procurement are analytics, automation, and improvements in procure-to-pay processes. Technologies such as robotic process automation and machine learning can help automate such mundane tasks as purchase-approval workflows and delivery scheduling. Similarly, advanced analytics can deliver valuable insights into spending and supplier relationships.

With the right digital enablers supporting an updated operating model, procurement can underpin an organization’s strategy to accelerate speed to market. Procurement can influence how to launch a product and increase shareholder value with improved supplier-collaboration strategies. After a minimum viable product is launched, procurement teams can work with the product-development team and suppliers to reduce costs and drive efficiencies. The entire procurement ecosystem supports this success.

Improving Alignment

Under the guidance of a forward-thinking C-suite, procurement is improving business alignment by building trusted relationships with stakeholders and understanding their most important initiatives and objectives. More than 50% of CPOs focused on implementing better business and stakeholder alignment strategies in 2021.

The development of category experts, who have specialized knowledge, insights, and contacts within a particular product category, illustrates how procurement is prioritizing business alignment. Because category experts’ activities are central to developing sustainable supply strategies and minimizing risks, other departments are now engaging with procurement early in the project-delivery cycle.

Delivering a Superior Experience

By improving the user experience for their colleagues across the organization, the procurement function can now make engagement and collaboration easier.

Intuitiveness, personalization, and performance are now integral to how procurement engages with internal stakeholders and suppliers. Self-service procurement, enabled by advanced digital capabilities and design thinking, is increasingly gaining traction—again indicating how procurement is evolving to become a strategic business function by embracing concepts rooted in a user-first approach.

In addition, procurement teams at future-ready organizations are undertaking joint innovation programs and partnerships with suppliers to boost revenue and resilience.

As product portfolios have shifted, so have supplier relationships and sourcing strategies. More than 66% of CPOs are prioritizing supplier collaboration and other broader value-generating activities. An increasing number of CPOs are working on innovative supplier collaboration, risk mitigation, and ensured continuity of supply.

The Future of Procurement

Few if any companies have cost savings in their vision statement. The C-suite goals are fundamentally driven by innovation and growth. While profitability is important, no company ever saved its way to prosperity.

As procurement evolves from its traditional role as a back-office cost-cutter and compliance enforcer to become a more strategically important function, it is reframing its mission to become a valued business partner and enabler of growth.

A new mission often requires transformational change, and procurement is no exception. These are exciting times for procurement, an often-overlooked business function. The most progressive procurement organizations will rethink their role and rebuild their ecosystem to play a more important role in the success of the business.


Learn how WNS Denali can help your organization improve its operating model and enhance its procurement ecosystem, by visiting wnsdenali.com.


Alpar Kamber is head of procurement services at WNS Denali.

 

 

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