Five Themes To Help You Reimagine Procurement
As “recovery” replaces “crisis management” as the main concern of business leaders in 2021, the procurement function in particular is set for a reevaluation.
McKinsey and Co. recently spoke with approximately 160 procurement professionals to see how they are preparing for this next phase. “Procurement leaders were close to unanimous in agreeing that a reimagination of the procurement function will be required, both to succeed in recovery efforts and to transition to a new operating model that’s fit for the next normal,” it reported.
However, McKinsey warned, “It will be tempting for procurement leaders become either too conservative in their value-creation expectations, or too aggressive in trying to create value without the right enabling operating-model elements in place. If history is any indication, it will take parallel efforts, both in creating new sources of value and in reinvigorating the operating model, for procurement to thrive.”
To help organizations maintain the right balance, McKinsey suggested they be mindful of these five themes as they rethink the procurement function:
- Recalibrate cost-saving targets by zero-basing category and value-creation strategies.
- Unlock new opportunities by investing in supplier partnerships and joint innovations.
- Accelerate value capture, leveraging digitization and spend analytics.
- Enable remote-working models by transforming to a future-ready operating model.
- Help employees adapt to new working models by reinvigorating both core and new capabilities.
In a new white paper, the global management consulting firm says organizations also need to ask themselves the following questions during this “reinvention” process:
- “Are we maximizing value creation in a post-COVID world, such as through rebalancing cloud and on-premise IT infrastructure, revamping office footprints and accelerating adoption of new automation technologies?”
- “Have all important categories fully adapted to shifting demand/supply dynamics and supply chain risks?”
- “Are purchasing channels and processes enhancing user experience, minimizing value leakage and maximizing suppliers’ performance?”
- “How much more value could we generate in our partnering, both internally with the business, and externally with suppliers?”
- “Where could additional investment in processes, digital, data, organization, governance, capabilities and culture could help procurement operate more efficiently and effectively?”
Adding another wrinkle to the challenge at hand, procurement leaders might find they also have to fix job satisfaction and productivity issues. McKinsey reported that 43% of the procurement leaders it interviewed had noticed a drop in morale among their teams, which it attributed to a “lack of efficiency and cohesion” among team members working remotely.
The McKinsey report can be read in its entirety here.