Next-generation purchasing models seek to propel businesses into the digital age. In the past, purchasing models were focused on achieving effective management of acquisition prices, which was 100% supported by senior management. However, today we have reached a turning point wherein it is mandatory to promote the digital transformation to ensure the steady growth of the business.
The purchasing process is critical in the strategy of any organization, irrespective of where it is located; it goes beyond just demand and supply. Therefore, those responsible in the area must focus not only on generating savings, but also on creating value for the company.
For this reason, professionals in the purchasing division are considered as important as the main partners of the organization and are placed at the organization’s center. Purchasing Directors (CPOs) today are dedicating 15% less time to transactional and operational activities so that they would have more time to work on organizational growth-related initiatives, such as influencing demand, driving innovation, and working closely with suppliers’ strategic partners.
In short, purchasing is becoming the driver of internal collaboration in organizations, which also implies that CPOs now have to:
- Progress towards flexible and agile operating models
- Reduce risk
- Promote sustainability
- Optimize decisions on acquisitions, acting as a project leader and empowering people from other areas to share their efforts and knowledge for the common good.
- Create alliances outside the organization, acting as a bridge between the rest of the functions and the supply networks, as collaboration with suppliers can generate excellent growth opportunities.
It can be challenging for CPOs to decide on the operating model and the overall strategy best suits them. Starting the transition to a new generation operating model can be a significant challenge. However, with proper planning, it can be achieved quickly and efficiently.
The following are the six value enablers defined in the next-generation purchasing model, which can help determine where to expend the most significant efforts to achieve superior performance and greater profitability:
- Processes. In addition to synchronizing the processes of all business units, approval of user journeys for a given channel and category must be streamlined. This can be achieved in an accelerated manner by analyzing the information obtained from purchasing and payment systems.
- Government. Digital tools will be used to institutionalize decision rights through automated task flows that validate real-time policy compliance. Thus, it would be guaranteed that purchases are made through the correct channel and with the indicated suppliers.
- Organization. Agile concepts can be applied to free up human resources and assign them to contract and collaboration activities that generate more value for the business. For example, a consumer goods manufacturer can simplify access to business functions and on-demand purchasing expertise by forming a dedicated center of excellence with 25 FTEs specializing in contract creation, RFP writing, and defining statements of work.
- Capacities and culture. Adult education and open-source e-learning modules can be used to help employees develop their technical skills, including cost modeling, supplier market analysis, negotiation techniques, and more. With one-off investments in digital training plans, next-generation purchasing capabilities can replace legacy ad-hoc training programs.
- Digital technology. Automation can help eliminate unnecessary manual work and improve the working experience for internal users. For example, automated systems can be used to govern supplier selection, onboarding, risk assessment, and certification tasks.
- Data and analytics. Advanced analytics can be used to improve market intelligence and support purchasing decisions. All this is based on clear, exact, and consistent market data used in automated intelligent systems. For example, ML algorithms can be executed to match billing information to the correct spend category; robotic process automation can be used to extract vendor information from a secure data source. External data and indices can also be used to gain insights into specific areas.
Adopting a correct operating model for purchasing that represents a significant change can have evident and relevant benefits. The next-generation purchasing operating model can optimize payment terms and supply chain financing, capture analytical insights, and much more.
The most convenient way to approach the new model
Although there is no specific formula for developing and implementing the next-generation operating model in purchasing, it is necessary to consider the company’s existing competencies, the desired transformation speed, the level of commitment of the executives, and the economic resources available.
A well-conceived and implemented new purchasing operating model can take advantage of digital technology, data, and analytics advances and provide superior performance levels throughout the value-creation cycle. At CeleriTech, we provide the Business Analytics tools to help you face this change in the best possible way. It doesn’t matter if you are a small business or a large corporation; contact one of our representatives and discover how our solution, Keenlog Analytics, can initiate and accelerate your adoption of intelligent solutions that allow you to make sound decisions regarding the planning and operational control of your purchasing process.