“How good is your Procurement team?” is a loaded question. Not only is the starting point likely under dispute but so are the components or steps to take next. This article aims to provide definitions of different stages of Procurement maturity as well as define the building blocks required to mature your company’s Procurement approach.

Definitions of Procurement Maturity (from least to most mature)

Tactical

• Tactical purchasing 
• No coordinated aggregation 
• No planning

Contracting 

• Procurement team brought in periodically to help with contract execution
• Basic spend analysis to target savings opportunities through bidding

Coordinated Sourcing

• Basic sourcing strategy in place with spend analysis, market benchmarking, and coordinated bidding
• Some collaboration with stakeholders to understand requirements 
• Procurement is the negotiating and contracting voice to supplier

Category Management

• Limited category sourcing strategy 
• Category cross-functional team engaged 
• Collaboration with stakeholders
• Some visibility of spend and some performance reporting 
• Ad hoc supplier performance management  
• Use of online sourcing tools
• Understanding key levers but not full realization

Strategic Sourcing

• Comprehensive sourcing strategy completed each year as part of corporate planning process
• Early involvement of Procurement in all key decisions that impact sourcing with cross-functional team engaged
• Full visibility of spend
• Performance reporting monthly 
• On-going positioning with supply base
• Regular supplier consolidation and expansion cycles
• Integrated supplier-level business criticality disaster recovery (BCDR) and sourcing strategies
• Active supplier performance management for innovation 

Building Blocks to Mature Procurement Approach: The Minimum

There a three building blocks, I view as minimum requirements any Procurement needs to provide and accel at:

1.     Process Support for the general steps of procurement process such as request intake, RFx bid execution, vendor selection, negotiations, contracting, and supplier on-boarding

2.     Spend Management such as spend visibility (at supplier level) and accuracy (by tying spend to Finance reports and schedules)

3.     Vendor Management including performance reporting (KPIs), regular meeting cadence based on supplier criticality (SRMs), some monitoring of service level infractions (SLAs), and some supplier-level BCDR planning

Building Blocks to Mature Procurement Approach: Above Average

After getting to the starting line, Procurement needs to expand its sight beyond the tactical execution by pro-actively optimizing the supplier base and integrate its activities with larger corporate planning cycles:

4.     Supplier Base Optimization includes regular supplier consolidation & expansion cycles and on-going assessment of your company’s positioning with supply base

5.     Corporate Planning cycles need to be leveraged by Procurement via their category planning process (via integration of savings targets in budgets, for instance) and via overt ties to company and functional strategies

Building Blocks to Mature Procurement Approach: The Pinnacle 

By collaboratively helping their internal customers execute their respective business priorities, Procurement has earned “a seat at the table” by having built trust and by having developed a working relationship that has delivered real wins. 

6.     Collaboration for Innovation is achieved by actively managing the supply base for innovation and by fostering highly cross-functional collaborations for all strategic engagements (big or small)

If you want to self-assess your company’s Procurement teams maturity, look for it under my published articles on LinkedIn.