Procurement Needs a New Operating Model, Part 1: Process

As a member of the Procurement Foundry community, you faced the transformational events of 2020 and quickly evolved to meet the challenges within your organizations. Perhaps you might have even looked here, within the Foundry’s blog, for some guidance. When I wrote this first article of a three-part series on the reinvention of the procurement operating model, the events of 2020 were fresh in my mind and highly relatable as I too was navigating through the disruption in real-time. I’m excited to share my perspectives and best practices with this highly engaged community of experts and welcome your comments.

 


Organizations learned many lessons in 2020. The most important one was something that we, procurement leaders, already knew in our gut — businesses with great spend and supplier visibility were able to adapt quickly and be agile, while those tied to old operating models struggled. We learned that procurement’s old operating models no longer work, and we must now transform to better support the businesses we serve.

 As 2021 is likely to bring more surprises and unexpected events, procurement must evolve to support whatever lies ahead.

New Technologies for the Same Old Models Don’t Work

Despite ongoing digital transformation efforts across all industries, the reality is that procurement models have barely evolved over the past decade. Many procurement functions are still operating “in the basement,” where functional leaders only engage with procurement to support the acquisition of goods/services or purely to comply with internal policies. Rarely is procurement used to drive better business outcomes, let alone as a competitive advantage.

A New Model: Unlock an Agile Process to Drive Value

Procurement models of the past often leave organizations short. A traditional commodity-based approach led by category experts with decades of experience may have worked in the past, but it also created silos without clear responsibility and accountability across the supply chain.

 The future of procurement must be far more agile, enabling more value capture and becoming a real competitive differentiator for product innovation, managing spend categories end-to-end, and bringing groups together to encourage cross-functional collaboration.

To fully support this new strategic position and transition from a hurdle to an enabler of value, procurement must transform its operating model. Our guiding principle must be to support businesses in a much more proactive and assertive way, to be ready for whatever lies ahead. Over the past year, I have witnessed how companies with strong Business Spend Management (BSM) processes are much more resilient and assertive, outperforming those stuck to traditional siloed procurement processes and operating models

 

Our guiding principle must be to support businesses
in a much more proactive and assertive way,
to be ready for whatever lies ahead.

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About the author:

Michael Van Keulen (aka “MVK”) is a passionate and seasoned procurement evangelist with a comprehensive track record of driving value through business transformation at global companies.  MVK is currently the Chief Procurement Officer at Coupa Software, the global leader in cloud-based Business Spend Management software, where he is responsible for driving best-in-class procurement practices across the company, support business development and be a source for peers looking to elevate and (digitally) transform procurement.

MVK is especially passionate about building teams, driving value, organizational transformation, CSR, and diversity & inclusion.