Procurement goes for gold

Enterprise agility

A new report from the Hackett Group details how procurement can enable enterprise agility

The Olympics are just over a week out, but there’s no need to wait for footage from Rio to start streaming to see agility in action. It may not be the men’s 4×100 relay in Beijing, but business agility is increasingly in the spotlight as technology and competition accelerate to a fever pitch. And procurement has the chance to be the Jason Lezak for the enterprise, but instead of swimming anchor they’re the tip of the spear for helping to bring new products to market and enabling a broad set of business objectives.

Agility is more than moving fast, it’s an understanding of obstacles to revenue, executing on plans to avoid them, and pivoting when necessary. Consider the variety of business risks present in the market today. The perception of many of these risks is actually intensifying (see chart below).

Business risks

Recognition of potential pitfalls is key, but how can organizations improve their ability to react to a new regulation, a new competitor, or a talent drought? For many organizations, the answer is to transition their procurement teams from reactive to proactive.

In their recent report, the Hackett Group addressed how procurement can enable enterprise agility. They identified four must-have attributes for agile procurement.

1) Information-driven, proactive decision-making

Agile enterprises don’t base decisions solely on quarterly or annual planning cycles. Rather, they react to fluid information in real time and at all organizational levels. Analytics and the right tools are paramount in enabling this capability in the procurement department.

This requires a recognition that procurement and the business as a whole may not have all the facts, all the time. Instead, practitioners should focus on understanding the relationship between performance drivers and outcomes. The Hackett Group identified a “substantial gap between top-performing organizations and peer-group companies in the use of business analysis in critical areas of business support.”

2) Digital value network

This point speaks to the need for a digital backbone in every company. By connecting tools, people, and processes in the cloud, organizations will see an immediate agility dividend. If this can be done through a single network, all the better.

But the connectability goes beyond the day-to-day internal workings of a company. The report notes, “Agile enterprises are leading their industry competitors in digitally transforming not only their internal operations, but also their supply and demand chains.”

3) Customer-centric

A core consideration in being customer-centric is structuring the procurement department with the end user in mind. Quality service design identifies the functionality desired and information needed from the perspective of the consumers of procurement services. In this approach, services are designed based on users’ wants and needs, rather than forcing them to change their behavior to accommodate procurement’s internal processes.

According to the Hackett report, “World-class organizations are service-oriented and customer-centric in their approaches to procurement delivery.They report high usage of both employee and manager self-service, largely because they create capabilities with the customer experience in mind.”

4) Operationally responsive

This one may be the most agility-centric of all the competencies discussed. Operational responsiveness is essentially agility by another name. The Hackett Group chalks this responsiveness up to three factors:

  1. The ability to sense or anticipate changes in business conditions that require an operational response.
  2. Ability to rapidly analyze the impact of the change and develop an adequate response (i.e., analytical and decision-making capability).
  3. Ability to swiftly execute the planned response.

A fifth component Tradeshift believes to be essential for an agile procurement department is collaboration. Collaborative procurement should begin as early as the product design phase, with procurement working with designers to include the right materials and loop in key suppliers at the earliest possible moment.

Collaboration allows procurement to help set strategic direction as well as highlight problems as well as opportunities early on. This driver’s seat view means procurement can be more effective in hitting organizational KPIs.

The Tradeshift perspective on the Hackett Group’s four key competencies and report is mostly in agreement, but perhaps organized in more of a hierarchy. Procurement needs the right tools and processes to enable agility, this means going digital and embracing data in real time are foregone conclusions. But to buy the right software, procurement needs to start with their end customers (internal and external) in mind.

If an eProcurement solution isn’t easily usable and widely adopted across all silos of a company, organizational agility is unlikely to be the result. Lastly, we view organizational responsiveness as another term for agility rather than a competency (i.e. it’s the goal, not a tactic to get there), but would add in collaboration as the glue that ties it all together.

For the full report from the Hackett Group, simply click the link below.

Get your copy of “Procurement’s role in enabling enterprise agility”!

About the Author

Tradeshift connects buyers, suppliers, and all their processes in one global network. We help you transform the way you work with suppliers today – and adapt to whatever the future brings.

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