Changes afoot for the role of Procurement – Successful Procurement Transformation through Change Management
Faced with advancing digitization and complex, global production procedures, procurement processes will need to be radically transformed. We have summarized the key milestones for successful procurement transformation projects.
The motivations behind a comprehensive procurement transformation are diverse and depend upon a company’s own business objectives and its competitive position. In manufacturing companies, for example, the desire for a global network of all its production sites or autonomous production control, within the scope of Industry 4.0 , can be the catalyst for change.
In other industries, on the other hand, business models based on innovative big data technologies are placing new demands on procurement. Even mergers and acquisitions bring vulnerabilities, as procurement organization is not harmonised. Moreover, the persistently high rate of digitalisation in almost all sectors of the economy is a driver behind procurement transformation, as competitiveness increasingly boils down to the speed at which innovative products and services are brought to the market.
In turn, shorter development cycles require the involvement of the Procurement department in innovation management across the company. Only this way can buyers fulfil their role as interface managers and provide optimal support for initiatives in other business areas such as product development and manufacturing, with analyses of product groups, specifications and target prices.
Milestone 1: Build up a clear picture of the end result
Converting the role of Procurement within a company is a multi-dimensional process, which entails far-reaching structural and procedural changes. These include new organizational units, tasks, modified methods of collaboration, as well as appropriate training. As with any transformation project, the success or failure rests on the acceptance and motivation of the affected employees. And as such, change management is not an optional extra, rather it should form a mandatory part of the project from the outset.
An individual transformation concept should be based on developing a concrete picture of the end result, in line with the parent company’s strategy. Which tasks should Procurement handle in the future? Will it mainly control digital supply chain processes? Or will it contribute primarily with a view to reducing lead times in production? Further tasks could include an active role in managing innovation or boosting flexibility in the supplier network.
To achieve a common understanding of the future role of procurement management, why not hold workshops with supervisors from all business units?
Milestone 2: Involve staff in gap analysis and current situation analysis
Once you have built up a picture of the end result, compare it with your current procurement organization and processes. This gap analysis will uncover the need for transformation.
In addition to data and documentation analyses, employee interviews can paint an authentic picture of the status quo – within Procurement itself as well as departments with close ties to Procurement, such as Production, Development and Controlling. These interviews also help to promote the mission of the transformation project at an early stage. By making sure employees are involved, they will understand the need for change for their own position, without it being a top-down decision. This is an appropriate measure of change management to counteract any potential concerns and to boost the motivation of staff.
As part of a gap analysis, a comparison can be made between the current situation and the target outcome in order to identify and interpret the changes required. This will highlight the most important areas of action for reforming the process and organization structure, modifying the task and responsibility distribution, as well as determining the accompanying training requirements. To be able to realistically assess the related potential for synergies and to justify the change measures, each planned project should ideally be quantified as a business case. In this context, various options for action are played out, comparing their strategic implications for the company. Then on the basis of that assessment, the areas of action identified can be prioritised and set out in a road map.
Milestone 3: Run through the new processes
The importance of active change management cannot be stressed enough for a successful transformation. After all, the change in the role of Procurement involves a wide variety of departments and profoundly affects existing responsibilities and decision hierarchies. The attitude of the staff affected has an influence on whether and to what extent the modified processes and new organizational structures actually work in day-to-day business. In practice, workshops to support the transformation process have been proven to offer all stakeholders the opportunity to be continuously engaged. Members of the Executive Board need to actively get involved as a project sponsor or change agent, and serve as a final escalation body. By becoming involved in the project, sponsors ensure that the boardroom makes its commitment clear, thereby underpinning the strategic importance of procurement transformation across the entire company.
Change managers use individual lighthouse projects to deliver short-term implementation results. Because the entire procurement transformation process can sometimes take months or even years to complete, all depending on the situation. Since a high degree of patience and motivation is required on the part of the staff, instances of tangible success here and there are the best way to keep things going. Moreover, lighthouse projects offer the advantage of allowing procurement staff to gradually get used to their new role in the company through feedback loops.
Cross-department simulation workshops where staff can thoroughly prepare for the new procedures using concrete case studies are recommended for this.
The diagram above shows a newly-defined procurement process in twelve steps. At every stage, the departments involved in the process have different tasks and responsibilities, which are rehearsed with supplementary descriptions in the process simulation workshop. These kinds of workshops increase acceptance of the new procurement organization within the Procurement department itself and for all of the interfaces involved.
More procurement areas can then be transformed as part of sub-projects, until all processes finally resemble the end results you envisaged at the start.
Many successful practical projects have shown that Procurement is bolstered by transformation and there is no alternative to change. But a successful transformation needs to be accepted by employees and the process needs to be supported by change management accordingly. Only then can Procurement become an equal partner on par with other departments, making its own contribution to strengthening the company’s competitive position.
Dos and Don’ts for successful change management
- Involve all stakeholders as early as possible to minimise opposition.
- Set out specific goals and communicate any necessary changes to all involved using a clear road map.
- Challenge old structures and processes; check whether they are suited to the new objectives.
- Address your employees’ emotions and take their concerns seriously; they need to feel understood.
- Practice new structures in day-to-day work; use lighthouse projects to create a sense of achievement.
– Don’t stop communicating once the project has started; employees should be informed on a regular basis.
– Don’t underestimate your employees; their expertise helps to optimize processes in everyday life.
– Don’t mask problems – covering up mistakes can annoy stakeholders; together a constructive solution can be found.
– Don’t expect employees to get involved on their own; actively promote participation, because any dissidents can jeopardise the entire project.
– Don’t just talk about the costs and efforts required; sharing the positive interim results boosts the motivation of all involved.