Consulting Q&AWhat is a procurement maturity curve?
René SharmilaRené Sharmila asked 1 year ago

1 Answers
Maillet Sophie answered 1 year ago

Organizations procuring consulting services, should aim to reach a high level of maturity to ensure significant efficiency gains for their procurement group and company as a whole. To be able to draw its path to excellence, a company must first evaluate where it stands today vis a vis its competitors. The procurement maturity curve not only enables firms to identify the starting point of their path to consulting procurement excellence, but also defines where they want to go.

When drawn on a grid, representing a group of competing organizations, the procurement maturity curve provides all players with an excellent way to comprehend where they stand today, where they should be in the future, what is the value of doing so, and how they can manage to get there. These curves typically aim to show organizations’ procurement efficiency while buying consulting services through the following four levels:

#1. Operational & Tactical

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/Sourcing Mastery

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

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

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.

Progression Through the Procurement Maturity Model

Procurement teams may help build any firm by refining three important elements, and they are: people, processes, and technology.

Moving up the maturity model (curve) allows the firm to better control spending and optimize how it purchases goods and services, thereby impacting the bottom line, positively. While some organizations are ready to advance (for instance, moving from Stage 1 to Stage 2) this might be the best option for a smaller organization with fewer resources. Moreover, moving towards best-in-class offers a corporation enormous value over time (Stage 4).

Obtain Procurement Success at Every Stage

Earlier, it was talked about the three essential elements: people, processes, and technology. And all of these three aspects of procurement are extremely critical in achieving advanced procurement maturity. In fact, all these three are actually interconnected.

Moving the company to the second stage of maturity and beyond necessitates a strong technological foundation to support the people and processes. It can be difficult to manage change both inside the procurement team and across the firm. The investment, however, is well worth its weight in gold.

Having a solid technology foundation will enable individuals to devote more time to higher-value aspects of strategic sourcing, managing more spend, and optimizing the manner in which the company purchases goods and services from various vendors. Doing so, will help them in maximizing the value as well as in driving innovation throughout the organization.