Wednesday 23 April 2014

What Does Procurement Maturity Do For Your Business?

by Mickey North Rizza

Procurement maturity. Yes, for some businesses this is an oxymoron, but at most, when the Procurement Organisation has become more mature, so does the value contribution and increased financial performance.

The chart below is based on a client’s path to excellence and the value contribution attributed to achieving higher levels of performance when focused on improving twelve critical components of success.

Unfortunately, most Procurement and Sourcing organisations find it easier to stay stuck in old practices such that they work hard, fight off the internal struggles of day-to-day activities and achieve some successes.  The latter is just enough to keep them engaged and the company happy.   As many have said to me, “why rock the boat?  Staying on the left side of this chart is fine for our company.”

Why rock the boat?  First and foremost, it is your fiduciary responsibility to bring value contribution to the forefront of your business. Subpar performance does not help your business or the supply and value chain it feeds and services.  Think about it – your company hired you to make a difference – do it.  Grab the opportunity and run with it.

What, you don’t know how to do it?  Remember, resources will make the difference – People, Process and Technology.  Start with understanding where your group is on the maturity curve. Then, understand the twelve components that can make or break your path to success; look for opportunities; seek help externally and set a course in motion to make a difference.

Focus on the money – as one CPO told me, “Follow the money – it will lead you to more value every time.”  When you find savings you are on a path towards the money, but what does its real value mean – margin? ROA? ROIC? EPS?  Think about the business value it brings and the impact your business will receive from it.

That’s it – Procurement Maturity brings value – quantified it is money, qualified it is a high performance efficient and effective work team, and overall it is solid value contribution to the business.

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