What is procurement transformation?

By Digital CFO Asia Editor | 4 Jan 2021

What is procurement transformation? Does it fall under finance transformation? It does to a certain degree, but the procurement job function has grown to such an extent that organizations should start looking at it as a stand-alone function from finance. Simply put, procurement transformation refers to a specific type of organizational change management that focuses on strategies to enable major and long-term improvements to procurement and supply management processes, activities, and relationships.

So why is procurement important? procurement is viewed as a strategic function working to improve the organization’s profitability streamline processes, reduce raw material prices and costs, and identifying better sources of supply. The most common goal for procurement transformation is about reducing costs, but it is more than just about that.

Organizations and their procurement team are most often than not, swarmed with paperwork and manual procurement processes, as many internal stakeholders do not regard procurement as a digital transformation priority. But that no longer seems to be the case. Procurement leaders, external vendors & consultants have shake things up by positioning the procurement function as a strategic value-generator that help to enable other business units such as marketing and IT. More and more internal stakeholders are starting to buy-in to the idea of procurement as a strategic profit center, which will ultimately help to kickstart the procurement transformation in their organizations and make it a reality.

For procurement to transform the corporate culture & status quo, a digitally sound and modern CPO (Chief Procurement Officer) is a must. The right executive-level procurement leader will evangelize procurement transformation both internally and externally to transform its approach to people, processes, technology, and lead it to greater success. Besides the CPO, external consultants & vendors are also playing a big part in empowering procurement leaders with the right digital knowledge to lead the digitization of the procurement function.

The last decade has seen procurement transformation evolved considerably. Procurement transformation is not about moving from point A to point B and then considered it a job done. It is about instigating a cultural shift in corporate mindsets and building a business whereby procurement is seen as a strategic value-add imperative instead of just a cost center. There is no immediate endpoint in sight and organizations should take heed that they keep themselves updated with the latest trends and insights in procurement.