Use Procurement Benchmarking to Drive Procurement Transformation.
Performance-driven Boards make Benchmarking a priority to compare their performance to that of their peers. This approach applies to all contributors of value creation for the company and thus, inevitably, to the Procurement function: the CEO and the leadership team want to know how well their Procurement organisation is performing compared to others.
In a Procurement transformation approach, a Procurement director having tangible items that can be compared (1) to the rules of the art and (2) to their peers will gain more credibility with their steering committee and will have an even more powerful tool to motivate their team to help conduct the change towards an improved performance.
To transform your Procurement organisation in order to sustainly improve its performance, you need to continuously improve its practices and to adjust its skills and its sizing.
For this, it is first essential to rely: (1) on a solid repository of practices, (2) on a repository of relevant indicators and (3) on an appropriate system for measuring the level of these practices and these indicators.
Once these fundamental conditions are gathered, you can establish a structured Procurement Diagnosis, that is to say: evaluate the level of practices & indicators compared to rules of art, and thus identify in a natural way the practices you would have to improve as well as the indicators you would have to tune.
Then you obviously conduct the « Benefit/Effort » exercise in order to highlight the practices & indicators whose actions of improvement will contribute the most to generate value for the Procurement organisation and therefore for the company.
Procurement Benchmarking in the Transformation approach
At this stage of the approach, and prior to actions implementation, it is extremely useful (1) to compare the level of practices & indicators with that of other Procurement organisations in companies of similar size & turnover, and (2) to look at how the best ones do in order to be more performant in these practices & indicators. (*)
Get inspired from what the others are doing! That way, no doubt you will be in a better position (1) to tune the actions of improvement and (2) to foster innovation within the company without reinventing the wheel.
In summary, use Procurement Benchmarking when driving Procurement Transformation means:
- to compare practices and indicators of a given Procurement organisation to (1) Procurement rules of art and to (2) practices and indicators of other Procurement organisations in companies of similar size & turnover
- to look at what the best procurement organisations are doing to be more performant
- to look how the best procurement organisations are doing to act on these practices and indicators
- to have an additional tool for team motivation in driving change and continuous improvement
- to provide a stronger dimension to the Transformation approach
Have a Great Day!
(*) Besides, if you are Procurement Head/Manager or CEO, perhaps would you be interested to be part of the Benchmarking panel.
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