Estimated reading time: 5 minutes
• Are you looking to transform your sourcing operations and wondering how you can build a best-in-class procurement organization?
• Whether you’re a Non-Governmental Organization (NGO), multinational cooperation, or a business with regional and international operations, building a global procurement organization might just be the answer to your problem.
• Here are five steps to help you construct a top-tier global procurement organization.
Step 1: Appoint an Experienced Taskforce
As one of the major expenses in business, accounting for 80% of total spending, procurement is a crucial organizational function. Consequently, the creation of a best-in-class procurement organization demands an experienced committee at the helm.
Who qualifies to be a part of this pioneering team? Senior procurement executives, experienced procurement specialists, and seasoned sourcing experts.
With such a team assembled, one of the first items they’ll need to discuss is the procurement strategy.
Step 2: Develop a Procurement Strategy
A procurement strategy refers to the policies the organization is going to follow regarding sourcing and procurement. It’s a plan of action that includes best practices and approaches to be followed by all.
A skilled committee will be able to develop a sound and pragmatic procurement strategy in a few weeks. And depending on the urgency, implementation of the revised and approved strategy can start immediately. Within six months the average company will begin to see a difference in its cost-mitigation efforts.
Step 3: Designate Roles and Responsibilities
One of the fastest ways to undermine any project is failing to assign roles and responsibilities. When building a best-in-class procurement organization, it’s imperative to clearly designate who is in charge of what at the local, regional, and international levels.
· Global council members
· Global procurement officer
· Regional council members
· Regional procurement officer
· Regional procurement team
· Regional finance director
· Local CEO
· Local operations officer
· Local legal team
Establishing these management roles and making certain everyone knows what they are responsible for encourages productivity, team coherence, and unity. Duties are not ambiguous and each team member is cognizant of their part in making this procurement organization a success.
Step 4: Provide a Decision-Making Framework
On top of their unique roles and responsibilities, stakeholders need to be guided on how to make decisions that are in line with the global procurement organization and its best interests.
This is done by relying on a decision-making framework developed by leading management consultants Bain and Company known as RAPID. This is an acronym for
Recommend: Who is tasked with creating the organization’s category strategy?
Agree: Does everyone have equal say or does one person have veto power?
Perform: Who is responsible for executing the decision once made?
Input: Whose advice is required in order to reach a satisfactory decision?
Decide: Who has the authority to make the final decision?
Those tasked with making final selections and overseeing contracts can rely on this resource when making their decisions. In this way, every decision-maker within the organization can follow the thought process of their peers. With decisions based on this model, the organization is able to secure the best global suppliers in a cost-effective manner.
Read more: The role procurement teams play in contract management
Step 5: Invest in Continual Skill Building
Having completed the above preliminary steps to establish a best-in-class procurement organization is merely the beginning. But how do you maintain what you have begun to build?
In a nutshell? By investing in continual skill-building.
You see, in order to be the best and to retain that position requires ongoing investment in skills training for your global procurement team members.
Investing in your talent pool is an excellent way to solidify your position as a strong, top-performing, and experienced global procurement organization.
Routine evaluations, assessments, seminars, and conferences should be part and parcel of your skill-building plan. Furthermore, you’re more likely to attract higher quality talent when you can demonstrate that your procurement organization is actively involved in employee career development and practically supports its staff.
The Case for a Best-in-Class Procurement Organization
It may be that you’re wondering why you should even go through the trouble of building a global procurement organization? If we could narrow it down to a single aspect we’d have to go with: potential cost savings.
We’re aware that procurement accounts for the bulk of most companies’ spending. Thus, for businesses with regional and international operations, having centralized procurement operations can significantly help to lower this cost.
Year-on-year savings are possible for businesses that lay a sound foundation when constructing their global procurement organization. By taking into consideration the steps mentioned above and tailoring them according to your organization’s unique needs, you too can realize considerable savings within business units, categories, and the respective countries in which you do business.
We’re living in a world that’s increasingly connected. However, this interdependence means organizations face greater risks when sourcing in supply chain. Instead of having procurement decisions made from one command center, organizations are taking initiative to try and build global procurement teams that will ease their sourcing and procurement burdens.
While it does require a lot of grit to plan and execute an international procurement operation of this magnitude, armed with the right information, software, and support, the work moves along quite quickly.
From supplier management software to contract management options, ProcurePort provides organizations with reliable, robust, and innovative solutions that are trusted and used by businesses such as UNOPS, HUD.GOV, and conEdison.
To discuss procurement software with a consultant or to schedule a demo of our solutions, contact us today.