In this blog series we’re taking a close look at how procurement’s maturity curve affects its focus. Two recent posts covered procurement’s first priority – savings. Now we set our sights on compliance. First, we’ll examine how the evolving role of procurement has created an environment where increased attention to compliance is imperative; on the follow-up post we’ll explore how to improve compliance through enterprise alignment.
Procurement’s transition over the last decade from “purchasing” to its current strategic role has decentralized the actual function of “buying” within organizations. As procurement professionals, we build relationships with suppliers, negotiating and managing them. We define the purchasing experience, but actually don’t do much shopping. Instead, we place much of the responsibility for purchasing on others – consumers – throughout the enterprise (within the strict parameters that we establish.)
While ideally this increases the efficiency of the purchasing process, for procurement it creates a risky situation because our performance (as measured in savings) is now tied to the choices and activities of others. This dependence upon the actions of others is at best challenging and at worst frustrating.
The division between the current role of procurement and actual purchasing demands greater attention to compliance. Procurement invests a lot of time and effort in establishing beneficial contracts; those benefits are only realized if consumers know who to buy from and follow the ordering procedures put in place.
Compliance vigilance is the first step procurement can take towards managing forces outside of its function. Internal stakeholders are involved to varying degrees in sourcing projects, but the majority of actual purchasing efforts are extended throughout the rest of the enterprise. Ensuring compliance can gain a lot of traction simply through training and effective communication, helping others whose priorities and motivations might be different than ours to understand why adherence is necessary (and easy).
Procurement often uses the term “maverick or rogue buying” to describe off-contract or non-compliant purchasing. This implies intent to go against established practices; but it is more likely due to lack of awareness. The vast majority of off-contract spend is inadvertent; there is no intention to break procedures or expose the organization to risk. It’s procurement’s role to make clear how consumers are expected to make purchasing requests and from where they are supposed to buy. That’s managing compliance on a personal level.
The need to centralize supplier information and make it accessible has led to increased investments in eProcurement solutions. It makes the requisition-purchasing-approval process easier to work within, so users don’t stray outside of the system. eProcurement solutions alter the circumstances under which noncompliant purchases might otherwise be made. These solutions allow procurement professionals to focus their efforts on the more complex — and potentially more nefarious — noncompliant spend.
In summary, our own changing role in procurement – from purchasing to strategy – has created the need for increased attention to compliance while simultaneously generating the tools and process to ensure adherence. Be sure to read the follow-up in our next post on how to make compliance something people buy into instead of having to beat it into them. If you’re new to this series, get the background on The Procurement Maturity Curve – savings at every stage, in part one & part two.
* Spend management is increasingly complex. If you want to learn just how much more valuable and effective your company’s P2P process can be, request a demo to see the possibilities. Or contact us with your questions anytime.