Consulting Q&AWhat is procurement capability maturity model?
David McGimpseyDavid McGimpsey asked 1 year ago

1 Answers
Petunia UlfssonPetunia Ulfsson answered 1 year ago

The procurement capability maturity model is a methodology that describes an improvement path from an ad-hoc, immature process to a mature, disciplined process that is fully focused on continuous improvement. Moreover, the capability maturity model can be graded in different ways. We’ll be looking at three examples here: Coupa, Gartner, and Consulting Quest.

First up, Coupa.

As per Coupa, the procurement capability maturity model focuses on three interdependent elements: people, processes, and technology. By evaluating your organization’s position in reference to these three factors, you may determine at which of the four stages your organization is at. One, the tactical and operational level. Two, the sourcing mastery level. Three, the category strategy level. And four, the highest level of business innovation.

Second example is Gartner.

As per Gartner, the procurement capability maturity model is based on five levels of maturity.

Level 1 – Unaware: At this level, data is very inconsistent, incorrect, and incomplete across the department. Spreadsheet usage is very high, whereas the uses of reporting tools are highly limited. Moreover, performance management metrics are not identified or used.

Level 2 – Tactical: At the tactical level, employees and managers use their own departmental metrics. Data, tools, and applications are in “silos”. Moreover, the users are limited and often not skilled. Also, management or senior executives do not trust the quality and reliability of the data.

Level 3 – Focused: At this particular level, metrics are formally defined and management dashboard are often requested. Also, users are trained for using basic functionalities.

Level 4 – Strategic: Organizations at the strategy level have clear business strategy as to what needs to be done. Moreover, the deployment of enterprise metrics framework is established. Also, users are adequately trained for data processing and can use them effectively for strategic and tactical decisions.

Level 5 – Pervasive: At this stage, the information and data gathered is trusted and used across the organization. Furthermore, users are well-trained and highly skilled.

Lastly, let’s look at the example from Consulting Quest.

As per Consulting Quest, the procurement capability maturity model consists of as many as four levels. And it is to be believed that every organization falls into any one of these four levels.

#1. Operational & Tactical Procurement

At this stage, procurement organizations are still reacting, not planning ahead of time like they should be. They are very concerned with cutting costs, getting the best deal on things they buy, and making sure invoices are paid on time.

At this level, procurement may not even be a separate task. Instead, it may be like a "as needed" process. Staff buy their own goods and services, and finance has to try to keep these purchases under budgetary limits while also paying invoices and tracking spend as best they can.

#2. Strategic Procurement

Businesses at this stage of procurement maturity are embarking on the path toward significant value generation through business spend management. They use specialized procurement professionals to establish and implement procurement rules and procedures for critical procurement processes such as purchasing, contract management and negotiation, and strategic sourcing.

Moreover, these firms capitalize on the value of strategic sourcing by implementing a far more proactive approach to supplier management. They employ sourcing events to leverage economies of scale and negotiated agreements to achieve best pricing. At the same time, they also approach supply chain management with a cost-benefit analysis and apply procurement methods that assist in business continuity and competitiveness through supply chain resilience.

#3. Category Management Procurement

At this stage, firms are prepared to capitalize on the success and value generated by strategic sourcing. They wish to upgrade their capabilities by adding enhanced category management, as well as more sophisticated data analytics and modelling.

The procurement department is strengthened by the addition of category specialists. And these procurement professionals devote their entire skill set and time to specific spend categories in order to maximize return on investment and develop strong, strategic supplier relationships that add value not just through cost savings, but also through new opportunities for shared success and innovation.

#4. Best in Class Procurement

At this point, procurement organizations have fully aligned procurement’s goals with the company’s and provide the data and insights that fuel enterprise-level initiatives. They are trusted partners and sources of strategic value and innovation for the company, as well. If you want your business to go digital, you need to change how you buy things. The chief procurement officer (CPO), a powerful source of strategic leadership, can help you do this.

Furthermore, as you know, procurement is a source of savings and value that keeps getting better thanks to iterative process optimizations. People who work in procurement in the world’s best companies have full control over the Big Data that moves through their businesses, and by analyzing data coming from both inside and outside their own organizations, they can provide rich, detailed insights that help people make decisions all along the value chain.

To learn more about consulting procurement maturity, please read this valuable insight.