Procurement driving Value Creation

Published January 2019

Exploring the Not for Profit procurement differences

1Introduction

Often Procurement is a slave to the data generation process and drowning in statistics. Providing analysis that cannot be linked to action.

Procurement can fall into the trap of becoming a producer of numbers. Rather than a user of these numbers. Not taking control of the reporting landscape.

There is a need to move from a process of gaining insights to one of taking actions based on insights. Critical is to use insights to influence change.

It’s time for Procurement to drive value creation, through data, within the organisation.

2: Analytics linked to Actions

The full data value chain can be broken down into a number of process steps as follows:

  • Data capture and structure
  • Report generation
  • Analysis of data
  • Insight into the data
  • Influence based on the insight
  • Impact based on the actions associated with the Influence

An effective Procurement group has reached the point of impact, supported by their confidence in the integrity of information steps to reach this point.

In the Indirect spend domain, Claritum is focused on enabling Procurement to influence and impact by ensuring that there is confidence in data integrity and tools available to analyse and provide insight on which actions can be taken.

3: Procurement Ownership

You own your data and the use of this data to influence stakeholders.

To be in a position of ownership of your data there has to be a certain level of control over the generation of this data. If you are not in control, then how can you be confident in front of your stakeholders?

Procurement is responsible for generating relevant business information for these stakeholders. Enabling these stakeholders to take effective actions.

When business circumstances change or are forecasted to change, you need to be in a position to track or predict the changed business activity and ensure stakeholders are informed of the impact of these changes.

Analysis

Procurement professionals love to work with analysis. Analysing supply chain trends, pricing movements, political changes and the weather to name just a few.

This analysis you can do on your own, behind your screen, and in principle without talking to anyone. However, it is fundamental that analysis leads to insight, which is when you have information that will help you and your stakeholders make better decisions.

However, it is important to go beyond insight, to influence decisions.

Since you’re bringing insight to the table, why not also recommend actions to take to improve organisational performance? At the very least you must be in a position to challenge any recommendations coming from your stakeholders.

Lastly, you chase impact by following through on these recommendations. You must drive their implementation and sometimes even take the lead on certain initiatives. You follow these to the end and, through performance management, see if they’ve created the desired impact.

This is the Procurement value chain.

4: Key Issues to address

To be effective in adding value, though, there are some key issues that need to be addressed:

  1. Ensure your decision making is fully aligned to the organisation’s strategic business model. Looking for any conflicting business objectives
  2. Review the talent within the organisation to ensure it can support any proposed initiative/action
  3. Check information, that you are basing your influence upon, is up to date. Make sure up to date data is being fed into information generation systems.
  4. Process and data standards may need to be addressed (non-uniform standards on products, customer information and transaction processes for example)
  5. Make sure any action is backed by strong financial management focused on driving business performance.
  6. Source and simplify the process of obtaining key business information. Given the realities of modern multinational business supply chains it is important to simplify any process. Ensuring data from complex networks of production facilities, distribution centres, customer and suppliers, and resulting flows of products, services, finance and information can be trusted.

Addressing these issues will ensure that any actions are based on a solid foundation.

5Summary

Procurement has a pivotal role to play in value creation for an organisation.

Essential to this role is leveraging insights to take action that ultimately results in a positive impact for the organisation.

Data ownership and trust are key. Without this there will be a lack of confidence that will significantly reduce the level of influence.

It is also important to follow through on the recommendations. You must drive their implementation and, if necessary, take the lead on certain initiatives.

There are of course issues that have to be addressed in order to add value. If these are addressed, then there is a foundation to build trust and drive value throughout the organisation.

Specifically, for Indirect Spend, given the volume of captured data, it is essential to have confidence in data integrity. Plus, specific and focused tools available to analyse and provide insight.

See example case studies for Indirect Procurement Automation gains