1999. The year I first tasted procurement.
I was doing a summer job as a Buying Assistant in an automotive gearbox manufacturing company in my hometown.
Procurement, or purchasing as it was usually called back then, was definitely a back office function. Yes, there was some sourcing and supplier management involved as part of the team’s activity. The majority of their work though was tactical and administrative buying.
Fast forward 25 years.
We’re in 2024, and procurement teams are still getting trapped in administrative work and firefighting.
Why are we still discussing the challenges that we’ve been trying to grow out of for the past 15-20 years?
Don’t get me wrong. There will always be crises. We can’t sit in our ivory towers in a corporate office and never get our hands dirty.
But we shouldn’t still be discussing this topic now, with all the tech solutions and skilled procurement professionals out there.
So, why are we… and how do we fix it?
Why does Procurement get labelled as a back office function?
Let’s take a look at situations where procurement teams still get stuck in this rut.
It’s almost always down to one, or probably more, of these prevailing factors:
- Misaligned business objectives
- Poor data
- Inadequate or clunky technology
- Lack of mandate
These are usually a product of the procurement team and its leadership. But they are often also heavily influenced by the culture and political landscape of the organisation too.
One thing is clear:
In a well-run procurement organisation, aligned to the business and their objectives, with a competent team and user-friendly procurement tools, it should not be a back office function!
Why procurement technology is a key enabler
If procurement in your organisation is viewed as being a tactical, back office function, then you should be worried.
Why?
Because a lot of these tactical, back office tasks can already be automated. The software is already out there. The only reason it’s not eliminated more tactical and operational procurement roles already? It’s mainly down to low rates of adoption, and a reticence by the C-Suite to invest in procurement as a function.
Firstly, there’s a lack of awareness around the new breed of modern procurement tools. Legacy applications have maybe given procurement tech a bad reputation in some quarters.
Secondly, it’s not easy for procurement leaders to get a budget from the CFO for tech. And, when they do, historically there have been a lot of failed digital transformations.
This is changing.
There’s an increasing trend, especially outside of large enterprises, to opt for best-of-breed digital procurement tools with better user experience (UX). These applications usually also have shorter implementation times, and therefore, faster ROI.
They’re often brought in to digitise and automate the more tactical purchasing and buying tasks. It’s not going to take over the more nuanced and complex stuff that requires the soft skills we hear so much about.
The easiest way you’re going to ditch the administrative label of procurement is by freeing up time and resources. Those are the resources that should be deployed on actually delivering Category Management and SRM, which in turn drive more real value.
Pretty slides are just that.
If they’re never put into practice and lived and breathed on a daily basis, then it’s just a box-ticking exercise.
The easiest ways to get ROI on procurement tech
To be able to do this, and to make ROI on your procurement software investment a no-brainer, these should be the priorities:
- Automating administrative and transactional work to free up resources
- Having good spend data as a foundation for Category Management and SRM
- Clear visibility of all your contracts and terms
- Tracking performance and collaborating on value-driven initiatives with the wider business
Procurement is able to deliver significant value beyond tactical negotiations and price haggling. But without the basics, your team is like a sailing crew without a compass.
We’ve covered on previous podcasts and in past articles some of the challenges.
When it comes to sourcing the right procurement software and finding a budget – when there’s no clear money earmarked for investment – we’ve got you covered.
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(The right) people are the key ingredient
Of course, software alone is not going to shift a procurement department’s modus operandi from being tactical to strategic.
If you’ve got a team who don’t want to grow and are happy doing repetitive, administrative work, then some staff changes will inevitably be necessary.
There will be some team members who are keen to future-proof their roles. Invest in them, mentor them, and support them. They will be your most loyal employees.
For the ones who aren’t interested, it’s better to acknowledge this early, and involve HR to help find them alternative roles within the company. You don’t want them holding your team back and infusing negative energy.
Acknowledge the challenges at the outset, in terms of being able to put an effective digital procurement transformation strategy in place.
Tech can be the enabler, but the right leadership and team capabilities also have to be there.
I would also go so far as to say that a certain degree of centralisation is needed too.
A completely decentralised procurement and buying function can hamper this. Stakeholders often overpower local buying teams because of the perceived (or actual) hierarchy. Plant or branch office purchasing roles are usually for pretty junior or inexperienced team members.
In this scenario, even if corporate procurement roles exist, they can be futile if organisations are siloed and local buying roles report into Operations.
Everyone who finds themselves in a situation of being boxed into a back office, tactical-focused department should question why it’s the case.
Is your or your team’s capabilities or mindset a factor? When it comes to embracing change, you need folks who are flexible and open-minded.
If the problem is a wider, organisational one, or a highly political workplace, then your influence to change this perhaps is more limited.
Conclusion
Even though we shouldn’t be discussing this in 2024, we still are. We’ve come a long way, but we’re still on a journey.
The best way to break the cycle of back office work is to take a long, hard look as to why your team is being pigeon-holed. Is it something you’re able to easily influence and drive the necessary change?
Or is the mindset or culture prevalent in the organisation going to poison any attempt to move your procurement team into the 2020s?
While technology can’t solve it on its own, it should definitely be a core part of any procurement leader’s roadmap to move from being a back office to a strategic, value-driven team.
