Feb 21, 2017

The ProcureCon CPO Study 2017 features the Procurement Center of Excellence as the path towards a strategic role for Procurement. But where is it going?

If you haven’t seen it yet, ProcureCon has published its CPO Study 2017. The study is based on a survey of 35 Procurement executives and follow-up in-depth conversations with them. And most importantly, it shows a clear view of what Procurement’s current flight trajectory is. A key highlight is the rise of the Procurement Center of Excellence.

Procurement Is Becoming Strategic

The report shows a function in the middle of major transition. The main story is that of Procurement clearly moving from a tactical or operational role to a fully strategic one at the heart of business. And it’s not just idle chit-chat. 52% of Procurement organizations feel that their transformation into a strategic role is on schedule and 14% see themselves ahead of schedule. Even if Procurement has not arrived where it wants to go, a vision of the final destination is becoming clearer. While 24% of organizations report directly to C-Suite, 50% want to report to C-Suite, rather than to Finance, Operations or elsewhere.

The key to this strategic transformation is the pursuit of value. While savings remains the key goal of the function, it is starting to see its mission as value creation. As ProcureCon says, the function is now recognizing that “cutting costs in pursuit of savings is a recipe for conflict” internally, especially when cost-cutting comes into contact with other business functions who are focussed on outcomes. Procurement is starting to see value as a path forward to a strategic, consultative role. And companies are structuring their Procurement organizations to deliver this mission.

Strategic Command: Procurement Centers Of Excellence

ProcureCon says, “some degree of procurement centralization is a boon to their key missions of creating value”. Where previously Procurement has decentralized and then centralized again, a more sophisticated model is emerging: center-led Procurement or the Procurement Center of Excellence. What is a Procurement Center of Excellence, exactly? ProcureCon identifies it a Procurement function that works as a strategic command center focussed on consultative value optimization - while recognizing that certain commodities have to stay local. Spend Matters has already proclaimed that, “nearly all progressive organizations have some sort of Procurement CoE (or Center of Excellence).”

It’s clear that procurement technology has a role to play in automation and cutting out tactical processes. Removing repetitive operational tasks frees up Procurement talent to focus on strategic initiatives. However, procurement technology can do a whole lot more in building Procurement Centers of Excellence - and the best place to see this is in Direct Procurement.

First of all, procurement technology is an ideal solution for enabling a center-led approach. It can be used to enforce global strategy while navigating the complexities of local commodity sourcing. More than this, technology can enhance Procurement capabilities to the extent that what we are really talking about here is a Virtual Procurement Center of Excellence. A Virtual Procurement Center of Excellence is the result of a talented team and a platform that doesn’t just automate, but also allows much better visibility into cost and supply chain. The end deliverable is better sourcing decisions with more long-term impact.

There are a number of features and functions that identify a Virtual Procurement Center of Excellence. To read a full explanation of Virtual Procurement Centers of Excellence and what they should do, download this whitepaper from our company, POOL4TOOL.

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 Tags: Procurement

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