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August 22, 2018

Evading the Strategy Trap in Pursuit of Procurement Agility

Evading the Strategy Trap in Pursuit of Procurement Agility

Procurement’s desire to be agile is as well-documented and frequently discussed as our interest in transformation. In both cases, however, we are at risk of falling into the ‘strategy trap’ – the lack of clarity, direction and actionability that accompany all things non-tactical.

Tactical work and improvements are relatively easy:

Step 1: Document the current process
Step 2: Identify opportunities for improvement
Step 3: Define desired process
Step 4: Communicate and implement

While strategic work and improvements are a little more complicated:

Step 1: Become inspired by cutting edge approaches or thought leadership
Step 2: Struggle to decide how and where to begin
Step 3: Flounder
Step 4: Call a consulting firm and overpay for questionable results

The 2018 Procurement Insight Report recently released by PayStream Advisors highlights the challenges faced by procurement teams in companies of various sizes and levels of maturity. Their research reveals that tactical problems are as common as strategic ones. This calls for a broad approach to procurement process improvement that acknowledges all opportunities. As PayStream points out, “Organizations can use many strategies to improve their back-office processes; approaches may vary based on the complexity of the process, the urgency of the problem, and the current state of the department.”

PayStream 2018 Guide to Creating Synergy Among Procurement, Finance, and Accounting

Scale and complexity are clearly factors for procurement organizations looking to increase their agility, opening the door to two different layers of opportunity: strategic and tactical. In PayStream Advisors’ research, differing processes, contract compliance, and persistent use of paper documents to interact with suppliers are the top three challenges not directly involving the respondents’ current state of eProcurement automation. All three can be agilely managed using eProcurement technology – and as we have pointed out, the path forward and the ability to measure our impact with agile but tactical improvements are far more concrete.

Procurement Processes that Differ Across Locations/Departments

Procurement processes and technology that require everyone to work in exactly the same way across a large organization are the opposite of agile. Yes, agile suggests that procurement is able to be flexibly responsive when fielding requests from the business, but it should also allow justifiable variations within it. If a platform can accommodate one custom workflow, why not more than one? Some differences form over time because there is no reason for consistency or no one to draw attention to them. Other differences represent a unique opportunity for a specific team to optimize their approach locally. These must not be stamped out just for the sake of speeding up enterprise transactions. As long as their value can be documented and captured, agility demands that they be allowed to continue.

Frequent Off-budget and Off-contract Spend

Despite the negative perception of ‘maverick’ spenders, most off-contract spend is the result of buyers not being aware of an established process or making the decision that taking the wrong path forward is preferable than navigating an overly slow and administrative ‘right’ way. Ironically, when maverick spenders go off contract because it enables them to achieve quickly shifting objectives in short order, they (not procurement) are being agile. We need to find a way for everyone to be agile together by maintaining governance while also seizing unexpected opportunities.

Too Much Paper

Yes, many companies still struggle to accommodate paper-based transactions with suppliers. Sometimes small or laggard suppliers are not able to support procurement automation, and other times paper based processes are so ingrained that the enterprise is hesitant to disrupt them. The main opportunity here is to go digital, which may not mean going straight to the latest and greatest (i.e. most complex) automated processes. Implementation requires agility just as much as purchasing does, meaning that making multiple smaller improvements may be a surer path forward than one big leap. Procurement needs to understand the circumstances we are working in and adjust our approach to ensure success – even if it requires us to alter standard automation project management.

Agility is not just for strategic procurement processes. In fact, deftly improving tactical processes in a way that successfully reflects the current state of the enterprise is agile. When procurement is blinded by discussions and case studies focused on the most leading edge companies and teams, we can easily fall into a trap that ultimately bars our progress altogether. Rather than trying to be agile just like everyone else, procurement should demonstrate a true ability to be strategic by making real, measurable improvements that our own company can benefit from. Ultimately, agile is as agile does.

PayStream 2018 Guide to Creating Synergy Among Procurement, Finance, and Accounting
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