Aug 16, 2017

What procurement questions keep you up at night? In the Procurement world, there are a number of classic questions that spark many debates and discussions among practitioners. These are issues that never go out of style and are often revisited because they do not seem to have a definitive answer. Here are some examples:

  • What is the difference between Procurement and Purchasing?
  • Are Indirect and Direct Procurement the same?
  • What operating model is the best (decentralized vs. centralized / global vs. local)?

It was no surprise then, that when the U.S. blog, Spend Matters, launched its series “Ask Spend Matters”, one of the first questions that readers asked was: “Centralized, decentralized or hybrid sourcing structure?

How to choose the right model?

As a former Procurement officer who has worked in both a centralized and a decentralized model, I understand why this question resonates. As Spend Matters U.K. also pointed out in their answer, I do not believe that one is better than the other. It depends on many factors. Choosing an operating model should be an informed decision and not a dogmatic one because the consequences of choosing the wrong type can be dramatic.

Of the many factors to consider when deciding on a model, some are related to the rest of the company (organization, culture,…), some are related to the industry and the supply chain, and some are even category related! One factor in particular that can make it difficult to decide is time. Things change over time, meaning that what was right at one point in time may become obsolete and a hindrance later on.

The most important thing is to stay agile!

Having the appropriate operating model is important, but being adaptable and staying agile are even more crucial. To stay agile, you need to be able to:

  • adjust the model when conditions and contexts change
  • use the appropriate model even if that means running different ones in parallel (e.g. part of the spend is managed centrally and another locally).

This is where procurement technology can help by making it easier for the organization to run the relevant model where and when it matters. With the help of technology, organizations can also run hybrid models (a.k.a. “glocal,” a blended mix of global and local) with less hassle.

“The right platform not only allows Supply Management to extract more value from every event than it would otherwise, but, when properly implemented, also provides the foundation for a Virtual Procurement Center of Excellence— a VP-COE if you will. A VP-COE is the next phase of Procurement Evolution for leading Procurement organizations that have evolved from decentralized models through centralized and center-led models but which now need another evolutionary transformation to excel in today’s increasingly sophisticated global supply chains.” Virtual Procurement Centers of Excellence: The Next Level of Complex Direct Procurement, Sourcing Innovation, Nov. 2016

To find out more about Virtual Procurement Centers of Excellence, how they can benefit your organization, and how to implement it, download our white paper (written by Michael Lamoureux, the doctor of Sourcing Innovation)
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