Industrialization of Procurement by Implementing the Smart Procurement Organization

Despite considerable further development of procurement in the past few decades, significant savings potential still remains untapped in companies.

The main reason for this can be seen in the structure of many procurement organizations, which assign all strategic sourcing process tasks to one purchaser for one or, as a general rule, even several commodity groups. As a result of such organizational models, too many heterogeneous task packages are assigned to just one single employee despite frequent separation of strategic and operational procurement. In this way, purchasers become "commodity group generalists," who often do not have the time and know-how to perform each activity across the strategic sourcing process with the necessary accuracy and speed. 

This is where the smart procurement organization comes into play: The objective of this new organizational form in procurement is to minimize complexity of tasks for the purchasers, thereby tremendously improving performance in procurement. 

That’s why core focus of the smart procurement organization is on defining new task packages in the scope of strategic sourcing.

The procurement activities of strategic sourcing are recorded in detail. A cross-process analysis is conducted to determine the extent to which superfluous activities can be eliminated. Similar activities are then bundled into task packages. Typically, the five following task packages can be identified, each with homogeneous focal points of activity and manageable complexity, which are to be performed along the strategic sourcing process:

• Information management including the two sub-roles procurement data analysis (e.g. analysis of procurement volume, measurement of savings, etc.) and procurement market research (e.g. identifying new suppliers or procurement markets)
• Project management (e.g. coordination with internal customers and external suppliers, etc.)
• Administrative tasks (e.g. follow-up for tender, updating specifications, etc.)
• Development of methods (e.g. providing methods like the non-linear cost degression or analysis of supplier calculations)

Then, the right roles must be assigned to the purchasers for each task package across the streamlined procurement processes. When allocating and defining the respective roles, both the skills of each purchaser for a certain task field as well as the time needed for each process step or task are taken into account.

Information management

Information managers are assigned to the following:

Procurement data analysis

The procurement data analyst takes on tasks evolving around the preparation and evaluation of data. Accordingly, he records, among other things, the procurement volume and specifications, defines the baseline (yardstick for measuring savings) and the calculation of savings, evaluates the offers received, and provides data for (re-)negotiations.

To do a good job in the role as procurement data analyst, an employee should be selected who is characterized by an analytical mindset, excellent know-how about Excel, Access and ERP, high methodological competence and comprehensive controlling expertise.

By introducing a procurement data analyst/controller, all tasks evolving around the procurement data issue can be performed efficiently and effectively, in turn unleashing resources for other tasks in strategic sourcing.

Procurement market research

A procurement market researcher’s role includes research tasks, the analysis and preparation of industry information on the relevant commodity group (from the viewpoint of the "macro/bird’s eye perspective" on the procurement market). In addition, the procurement market researcher builds up a supplier database with the relevant countries and suppliers for each commodity group, and updates these on a regular basis (from the viewpoint of the "micro/researcher perspective" on the procurement market).

The procurement market researcher is characterized by know-how in market research from sales marketing, is trained in setting up supplier databases and has at least a good knowledge of English. 

The procurement market researcher’s role ensures that the most qualified suppliers are identified for each commodity group in terms of quality and cost, and that comprehensive understanding about the relevant market mechanisms and underlying value chain is created. 

The method designer’s role focuses on developing quantitative and qualitative methods which support the single activities along the strategic sourcing process or within one of the defined roles, and ensure quality of deliverables. The method designer accordingly consults the procurement market researchers and procurement data analysts with regard to applying the methods, such as the non-linear cost degression or analysis of supplier calculations, and makes sure these are conducted correctly.

To be able to process the method designer’s tasks well, the purchaser in charge should have good conceptual and analytical skills, be characterized by his ability to convey know-how, and be trained in developing quantitative methods (e.g. non-linear regression models).

The method designer’s role assures the quality of procurement activities, and in turn, the long-term implementation of sourcing initiatives at optimal costs.

The assistance role focuses first and foremost on administrative tasks like coordinating deadlines/appointments internally and externally, telephone service (e.g. following up on tenders or updating specifications).

Requirements on assistance capabilities are communication skills, reliability, very good knowledge of Power Point and Word and ideally, secretarial experience, too.

Thanks to the assistance role, all administrative tasks are bundled at a single point in order to make work easier for the other purchasers and to create additional capacities for strategic sourcing tasks.

The project manager’s role sees itself as the link between internal users and the suppliers. That’s why the project manager coordinates the procurement data analysis, procurement market research, development of methods and the assistance. He controls supplier management and the sourcing initiatives. His primary focus is on enforcing the necessary decisions to ensure implementation and a seamless flow of sourcing initiatives. He’s also the "face of procurement" in negotiations and for public events.

A qualified project manager therefore has high social competence, presentation skills, assertiveness, considerable negotiating talent and experience in project management. 

As a "personal caretaker," the project manager is the main contact person for internal customers, suppliers and procurement staff, and ensures the seamless flow of strategic sourcing.

To gain deeper insight into our approach for implementing the smart procurement organization, we offer you a "mini reorganization of procurement" in the form of a one-day workshop. Here, we develop the optimal procurement roles for your procurement department. The mini reorganization includes the following services:

Coordination of purchaser roles and the approach:

1. Establish databases for the reorganization (recording of actual situation):
   1. Include current structures and processes in procurement
   2. Determine procurement volume and number of suppliers
   3. Determine number of purchasers who deal with the material groups in the company
   4. Record job profile/definitions of tasks and main focus of activity so far
   5. Determine internal customers requiring support
2. Work out a proposal for the redesign of organizational structure and roles
3. Define an implementation plan for the launch of the smart procurement organization