Establishing a structured Procurement diagnosis is a reflex which tends to spread, although it is still not anchored within the companies. Today, the approach is more used in large companies than in small and medium enterprises. However, with the growing awareness of the Procurement function’s importance by CEOs of small and medium entreprises, the gap with larger companies will shrink rapidly.
The Procurement diagnosis approach is often launched at the initiative of a new Leader in the company (new CPO/Procurement manager, new CEO) aware of Procurement value to mark a breakthrough between an outdated situation and a more contemporary situation that generates more value for the company. For a small or medium company that has not yet a Procurement department, conducting a Procurement diagnosis is of course also very relevant; the diagnosis will be an ideal factual basis to help the leader in creating and in sizing the future Procurement team.
The profitability requirement of Procurement function is always stronger and the Procurement contemporary practices are always evolving in a pretty significant way. Thus, any modern company – regardless of size – must adjust its Procurement organisation, rapidly and proactively. A periodic and structured approach of Procurement diagnosis naturally places the company in a process of continuous improvement that will enable: firstly to sustainably anchor best practices, and secondly to permanently ensure that the Procurement organisation is adjusted to any evolution of the Procurement function.
In summary, establish the Procurement diagnosis of your comapny means:
- to deliver an objective picture of your Procurement organisation; and
- provide a structuring framework of continuous improvement enabling to build a Transformation plan that will provide value to the company
Here are our 15 tips to help you succeed in your approach of Procurement Diagnosis:
- Make sure your executive committee understands and validates the challenge of the approach; the message to get across is that you diagnose your Procurement organization to transform it, and thus to add value to the company
- If there is one, involve your Procurement team, as upstream as possible; the diagnosis is a great learning opportunity that will moreover enable to create the essential conditions to permanently motivate your Procurement team
- Select a competent partner, having the right method and the right tools; this partner will guide you in the process, while providing an external sight nuanced as the context of your company’s organization and will make the right recommendations
- Make sure that the proposed method will deliver a full and contemporary diagnosis, ie covering both the qualitative, quantitative and evolution dimensions
- Check that the qualitative dimension will give you a solid measure of the level of maturity of the Procurement organization and therefore will enable to identify practices to be improved and, as a result, the skills to be developed within the Procurement organization
- Check that the quantitative dimension will provide you with the « weight » of the Procurement organization (Procurement volumes, Procurement costs, Procurement savings) and a measure of its effectiveness so you can adjust its size accordingly
- Check that the evolutionary dimension will take into account the current and coming developments of the Procurement function
- Rely on a contemporary repository of practices; keep in mind that even if there is no standard of repository, the most common models generally cover 6-8 practice areas (Procurement strategy / policy, Sourcing process and category management process, SRM – supplier relationship/risk, Procurement performance/value, transactional process, talent management, CRM – internal customers management)
- Choose an effective and simple rating system for continuous improvement; a range of maturity scale from 1 (basic) up to 5 (excellence) is particularly well suited
- Check that the method includes a self-assessment step; that way, you will get familiar to the repository and you will be better prepared to the detailed evaluation/audit step that will be conducted with the selected partner.
- Be open during the evaluation/audit step; be transparent and open your book; always keep in mind that the goal is to have a picture of your Procurement organization that makes sense, that is seen as a starting point to transform your organization and – why not – as a point of comparison with other Procurement organizations (Procurement benchmarking)
- Prioritize the recommendations for improvement in terms of benefit & effort and focus first on the top 5-10 improvements; do not try to do everything at once
- Develop the Transformation/Improvement plan so that it is targeted on the value for the company and on the profitability of the Procurement organization
- Make sure the Transformation/Improvement plan is aligned with the strategy and the values of the company and have it validated by your executive committee before deploying it.
- Final tip, don’t forget to communicate; explain all or part of the Procurement diagnostic report to the right people within the company (financial controller, quality manager, internal customers), that way you will have their support during the Transformation phase
And of course, Have Fun! Again, this kind of approach is extremely motivating for the whole team!
Quick & Simple: Check out the testimony of a diagnosis experience and Understand how and at what cost the Diagnosis of your Procurement Function can be established (30 minutes online chat).
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