To drive the procurement improvement program, it is imperative to form a project team with a clearly defined governance mechanism, in order to determine areas to work on. Also needing to be considered is the percentage of team time being spent, particularly in the case of a highly decentralized procurement function being coordinated from different groups and locations and from different units. This is in fact often the case for companies who have expanded globally without an organic understanding of the need for their processes to evolve
We'll turn now to the process for implementing a structured framework. In the first step, the problem statement is established and discussed. This is the foundation for the entire process. A detailed assessment of the processes through a structured framework, with a focus on the determination of value leakages, can help determine multiple problem statements. For this reason, it is vital to accord the time and resources necessary for this step. Establishing clarity in thinking will bring clarity to action and thus measurable results in the improvement process. Thus, some fundamental questions will drive the shape of the process as a whole:
* What does past data reveal?
* Are there pain areas identified by the users?
* What are the effects and future trends of the particular industry?
* What is the present status of the supply market?
* Is benchmark data available, and has it been evaluated?
* What are the present strengths, weaknesses, opportunities, and threats in the particular industry?
Based on the answers to these questions, strategic decisions can be taken, and a fair idea will be obtained of the direction to be taken for improvement. There are of course many other questions which can and ought to be posed: it all boils down to a considered evaluation and articulation of the "as-is" as contrasted with the "to-be." This is where the real (and huge) value of a structured framework will appear: it can help organizations generate a systematic approach towards problem-solving, and therefore gain substantial benefits, such as centralized procurement activities, improved supplier relationship management (SRM), and innovative ideas coming from all levels of the organization
Once these questions have been defined, considered, and addressed, the next step is the generation of ideas by means of interactive discussions within the team, and between the team and external resources. The inclusiveness of this aspect of the process must address the stakes of the internal team, management, suppliers, customers, and competitors, so that decisions can be taken as to what ideas can be taken forward and how the process should be conducted. This phase is essentially a process of clarifying the "drivers." All too often, however, organizations fall into the trap of vague, grandiose generalizations about value, so it's important to emphasize that each and every driver must be related to one or more product groups. This will help in identifying the focus area for process improvement. For example, applying this thinking to the "indirect materials procurement" function may reveal that the potential sources of improving performance should include areas such as contract labor and office supplies.
After thorough investigation and further detailed analysis, some pilot implementations can be carried out to determine the business impact of the proposed changes. If the results of pilot implementations show satisfactory performance, then these trials can be extrapolated across the organization, and procedures can be established to make those part of the system. If the performance is not satisfactory, it is time to demonstrate commitment to the improvement process by returning to the investigation and analysis stage.
We'll turn now to the process for implementing a structured framework. In the first step, the problem statement is established and discussed. This is the foundation for the entire process. A detailed assessment of the processes through a structured framework, with a focus on the determination of value leakages, can help determine multiple problem statements. For this reason, it is vital to accord the time and resources necessary for this step. Establishing clarity in thinking will bring clarity to action and thus measurable results in the improvement process. Thus, some fundamental questions will drive the shape of the process as a whole:
* What does past data reveal?
* Are there pain areas identified by the users?
* What are the effects and future trends of the particular industry?
* What is the present status of the supply market?
* Is benchmark data available, and has it been evaluated?
* What are the present strengths, weaknesses, opportunities, and threats in the particular industry?
Based on the answers to these questions, strategic decisions can be taken, and a fair idea will be obtained of the direction to be taken for improvement. There are of course many other questions which can and ought to be posed: it all boils down to a considered evaluation and articulation of the "as-is" as contrasted with the "to-be." This is where the real (and huge) value of a structured framework will appear: it can help organizations generate a systematic approach towards problem-solving, and therefore gain substantial benefits, such as centralized procurement activities, improved supplier relationship management (SRM), and innovative ideas coming from all levels of the organization
Once these questions have been defined, considered, and addressed, the next step is the generation of ideas by means of interactive discussions within the team, and between the team and external resources. The inclusiveness of this aspect of the process must address the stakes of the internal team, management, suppliers, customers, and competitors, so that decisions can be taken as to what ideas can be taken forward and how the process should be conducted. This phase is essentially a process of clarifying the "drivers." All too often, however, organizations fall into the trap of vague, grandiose generalizations about value, so it's important to emphasize that each and every driver must be related to one or more product groups. This will help in identifying the focus area for process improvement. For example, applying this thinking to the "indirect materials procurement" function may reveal that the potential sources of improving performance should include areas such as contract labor and office supplies.
After thorough investigation and further detailed analysis, some pilot implementations can be carried out to determine the business impact of the proposed changes. If the results of pilot implementations show satisfactory performance, then these trials can be extrapolated across the organization, and procedures can be established to make those part of the system. If the performance is not satisfactory, it is time to demonstrate commitment to the improvement process by returning to the investigation and analysis stage.
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