Daily Archives: November 29, 2016

Virtual Procurement Centers of Excellence: The Next Level of Complex Direct Procurement

We have already discussed Value-Based Sourcing in Complex Direct Supply Chains and how it can generate an ROI well beyond what cost-savings focussed Procurement can generate on its own. We also indicated that a key requirement of success for value-based sourcing was a platform designed for complex direct procurement, and outlined the basic requirements for such in previous posts.

However, the right platform not only allows Supply Management to extract more value from every event than it would otherwise, but, when properly implemented, also provides the foundation for a Virtual Procurement Center of Excellence — a VP-COE if you will. A VP-COE is the next phase of Procurement Evolution for leading Procurement organizations that have evolved from decrentralized models through centralized and center-led models but which now need another evolutionary transformation to excel in today’s increasingly sophisticated global supply chains.

Today’s leading Procurement organizations are center-led. These Centers-of-Excellence are focussed on the identification of appropriate supply chain strategies, strategic categories, best practices, and knowledge sharing and often leave individual buys and tactical execution to the individual units in an effort to get the best of both worlds.

These centers of excellence typically build cross-functional teams to tackle strategic categories that represent all of the key divisions and business units, allow for the creation of flexible supply chain processes and commodity strategies through collaboration, and find ways to fully leverage strategic category spend across the enterprise. They, theoretically, give the organization the best of both worlds and many organizations that employ this model have evolved to be leading Procurement organizations, often recognized in the Hackett Group Top 8%. But is this as good as it gets?

Not even close. The view painted by consulting organizations offering to transform your Procurement organization into a COE is one shared through rose coloured glasses. First of all only high dollar “visible” strategic categories will make the cut due to the limited manpower and additional time required to manage global communications and project teams. A lot of spend will go unmanaged, and a lot of opportunities left untapped. This does not sound like the definition of a true center of excellence to us. Does it sound like a true center of excellence to you?

The long and short of it is, in order to get all spend under appropriate management in a large, distributed, global organization, a virtual procurement center of excellence is required.

So what, precisely, is it and what, precisely, do you need to enable it? Good Questions! And you will find the answers in Sourcing Innovation’s latest white paper The Benefits of a Virtual Procurement Center of Excellence for Complex Direct Procurement, sponsored by Pool4Tool. Download Now! [registration required]