• Ebony Hussey 26/04/2016 04:58PM

    In Source to Contract

    Setting up a procurement function

    Does anyone have any advice on setting up a procurement function?

    Where to start
    Useful tips
    Useful tools
    Lessons learnt
    etc etc etc

    Bit of background, I am setting up a procurement team within a department in an organisation, in hope to eventually role it across the whole business.

    I have worked in procurement for around 8 years and have been involved with setting up a previous centre but as you would expect, the situation differs majorly.

    Some of the areas I have previous experience in are;

    eProcurement specialist
    Business analyst
    Buyer
    Contract & Vendor Management
    Sourcing Specialist

    Any thoughts or tips would be appreciated.

    Thanks,

    Ebony

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  • Answers (14)

  • Anya McKenna

    27/04/2016 11:40AM

    I can't speak for all of procurement, as it isn't my background, but I do know how to set up an eSourcing centre if excellence. Phones4U are a great example of this, and before their unfortunate demise, they really had eSourcing nailed with Market Dojo.

    http://blog.marketdojo.com/2015/03/esourcing4u-how-to-set-up-centre-of.html

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    Ebony Hussey Hi Anya, thanks for your comment - I have already spoken to a colleague of yours - Lewis Barnard and given him my email address to send some details across. Although I think I am a while away from implementing a sourcing tool, I will certainly bear Market Dojo in mind.

    27/04/2016 12:22PM

    Ebony Hussey Thanks again. Ebony

    27/04/2016 12:23PM

    Anya McKenna You're most welcome. :)

    27/04/2016 01:10PM

  • Iain Wicking

    27/04/2016 04:24AM

    Also with information systems make it a ‘Transformational Plan’ and not an IT plan (reduce the influence of IT as much as possible). Go for cloud technologies to disconnect IT. Need to win the CFO over with an end-to-end P2P process that includes AP as a part of the overall process – remove his or her pain in AP if there is any. Aim to create a good ‘buyer experience’ and a ‘hybrid model’ that leverages the ERP. Getting hold of all the existing contracts can be a challenge as the BUs normally have them and they think if they are in a shared repository they can’t access them – they can if it is ‘digital’. Above all your technologies must fully support your business model and be shown to do so. Avoid sales speak and vendor promises – get them to prove their stuff delivers via Use Cases and demos and show how they will ‘stand up’ the service.

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    Ebony Hussey Hi Iain,
    Apologies for my late reply - thank you for your comments, you have provided some really useful tips.

    I agree with you in relation to the blockers - although IT are on my side as this is where I will be implementing the first phase. Finance, however agree in principle, however they do not understand the benefits of having a fully integrated P2P tool.

    In my previous roll I worked in both accounts for a short while and then moved on to help the set up of a procurement department, however this was a very different situation. There I used an Oracle ERP system, which I thought was a very good tool.

    However I think a tool such as this will be out of scope for this project so thats why at present I am looking in to a contracts/ supplier database and a tool where POs can be tracked and created.

    When I first joined this organisation, I joined as a contracts and vendor management so a I certainly agree with you in relation to trying to find historic contracts, especially as procurement activities where/ are so fragmented...

    What are your thoughts on talking to a web developer to create a bespoke tool? Or would you advise sticking to off the shelf products?

    Thanks again Iain, much appreciated.

    Thanks,

    28/04/2016 08:49AM

    Ebony Hussey Ebony

    28/04/2016 08:49AM

    Ebony Hussey Please ignore my typos also - I am repsonding on my phone on a very busy train! :)

    28/04/2016 08:50AM

  • Iain Wicking

    27/04/2016 04:24AM

    Done this many times. Through experience the place to start is the creation of a ‘business model’ that describes the role and objective of the proposed procurement function and the operation of its supporting ‘procurement value chain’ - analytics through to payment/settlements. This is a ‘strawman’ that you use to sell/market into the business and in your case it has to be enterprise wide as a concept from day one – if not the initiative can stall as it was never signed off. This acts to surface issues and understand challenges from vested interests (BUs). Helps understand who all the blockers are. The two main blockers are usually IT (control freaks) and Finance (why can’t it all be done in the ERP?).

    Once this has been refined and SIGNED OFF by the executive team you then start to fill in the blocks within the business model – process layers (macro process through to micro processes), roles and responsibilities, information services, policies/governance, points of interaction with BUs and externally to the organisation, etc. Additionally, you need to write a business plan that contains your enterprise wide category plan (activities over multiple time horizons). This should be then linked to the corporate business plan and clearly show how procurement will contribute to this plan – get that signed off also.

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  • Tannia McMartin

    27/04/2016 01:50AM

    While I agree on the policy process first statements - also you need to understand the spend you are dealing with - as consideration of this should influence the degree of flexibility in your processes. Developing processes and policy in isolation of an understanding of the spend profile may cause you to have to make wholesale changes to processes later. Nobody wants to do things more than once!

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    Ebony Hussey Hi Tannia,
    Thanks for repsonding - I totally agree with you on this.
    I think a big part of it is understanding what you spend and where - I am undertaking some spend analysis as we speak - I'm hoping this will highlight some "quick wins".
    Thanks again, Ebony

    28/04/2016 09:03AM

  • Justin Plokhooy

    26/04/2016 09:12PM

    Process, process, process. Be sure you start with strong processes and work from there. The biggest issue I see in most organizations is that they "grew up" with no or limited processes and trying to put them in place when native processes have development makes process improvement a struggle.

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    Anya McKenna This is the best comment and so true of forming anything. Be that a procurement function or an entirely new business. We are very process-driven at Market Dojo, even though we are still a small team, and it reaps so many benefits. In 5 years time, when we're 100x the size we are now, those processes we created on day 1 will make all the difference in streamlining what we do.

    27/04/2016 11:37AM

    Anya McKenna This is the best comment and so true of forming anything. Be that a procurement function or an entirely new business. We are very process-driven at Market Dojo, even though we are still a small team, and it reaps so many benefits. In 5 years time, when we're 100x the size we are now, those processes we created on day 1 will make all the difference in streamlining what we do.

    27/04/2016 11:37AM

    Ebony Hussey Hi Justin, thanks for responding. I agree. I have mapped out how it teh organisation currently works against how I think it should look and what processes/ policies/ governance/ tools I require to put these in place. There is just so much to consider!! Its difficult to know where to draw the line.... Thanks again, Ebony

    27/04/2016 12:25PM

    Iain Wicking If you really want to do it properly you would use an Enterprise Reference Architecture (ERA) approach which refers to the way in which an enterprise vision is expressed in the structure and dynamics of an Enterprise. This provides, on various architecture abstraction levels, a coherent set of models, principles, guidelines, and policies, used for the translation, alignment and evolution of the systems that exist within the scope and context of an Enterprise.

    28/04/2016 01:44AM

  • Cristian Martin

    26/04/2016 06:00PM

    Start with the policy and procedure. Once you get that right, at least everyone else will understand what the rules are and will try to follow them too.

    Try not to work alone and involve key stakeholders, if they are involved in the process being setup, they will also be your champions for it and will be enthusiastic about you and the new policy/procedure.

    Record your savings, it is your best/easiest ammunition to demonstrate your value to the organisation.

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    Ebony Hussey Hi Christian, thanks for your response. I agree - I have put the bones of a policy together along with what I believe would be useful documents/ processes/ templates/ tools etc to link into it. It is just knowing where to draw the line!
    I agree with you around the stakeholder enagement - I have involved them all from the start so when it comes to implementation they feel as though they have had buy in and hopefully al see the benefits.

    As for the savings - it's a great idea - unfortunatly at the moment it keeps going to the bottom of the priority list!! I will try and sit down tonight and record these though!!

    Thanks again, Ebony

    27/04/2016 12:29PM

  • Hillary Ohlmann

    03/05/2016 08:54AM

    You've already gotten a lot of great responses to your questions. I thought I'd include a couple links to posts on this issue from our blog to give you a bit more food for thought. And just so you know, DeltaBid has an SRM feature (https://www.deltabid.com/supplier-relationship-management-srm-software/) that can store supplier information and documents such as contracts and a requisitions module (https://www.deltabid.com/requisition-software/), as you mentioned you were looking for a smaller provide that might be able to provide these tools.

    Here are the posts:
    http://blog.deltabid.com/secrets-of-best-in-class-procurement-structures
    http://blog.deltabid.com/blog/great-procurement-department/
    http://blog.deltabid.com/blog/set-up-procurement-department/

    Good luck!

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    Ebony Hussey HI Hillary,

    Thank you for your response - I will take a look into Deltabid and let you know if I have any questions.

    Again, thanks for your response.

    Ebony

    03/05/2016 10:56AM

  • Michael Fletcher

    03/05/2016 02:14AM

    I agree with Justin and Philip. The procurement function must start with a plan to go forward. Before you start this process get everybody and dept that you need to work with on board. Start with getting KEY stakeholders locked in. As Christian said they will be your champions to drive it onwards and upwards. Before you can do any of this look at your current systems and if where they are not delivering. There is an old saying 'If it is not broken don't try to fix it.' Keep what is working and replace or improve what is not. Work out what processes you need by listing them out as modules.

    To kick it all off - Start with:

    1. Business Identification / business plan and design / business model / sustainability of the final business model to be used
    2. Approach it like a project - project planning
    3. Set about the task/activities that must be done to reach the next task and activity
    4. The more depts. you involve the more likelihood of success, so getting commitment at this point is critical
    5. Identify the key areas you wish to remove, improve or replace with these depts., if they see an improvement in their own departmental processes they will be onboard more quickly
    6. Look at cloud based systems working in real time, opposed to expensive systems such as Oracle or SAP or even having a system tailor made for your requirements
    7. Look at systems that have CLM 'Contract lifecycle management solutions and EP, P2P and AP processes in place (world leading organisations are virtually paperless)
    8. Remember the golden rule. Just because a supplier has delivered before, does not mean they will continue to deliver if they are not monitored.
    Remove any suppliers that you have had issues with by doing a replacement transition
    9. At every step of the procurement function involve the stakeholders and relevant depts and complete he function activity/task by activity/task then move onto the next until you can complete a project sign off

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    Ebony Hussey Hi Michael,

    Thanks for your reply - it is very useful information. I do have a project team in place helping me to set up this function and it seems as though we have quite a few of your points covered off - its nice to know I am thinking along the right lines!! As for the points not covered I will look to include them.


    Thanks again Michael.

    Ebony

    03/05/2016 10:55AM

    Michael Fletcher Your welcome

    20/05/2016 02:05AM

  • Michael Gell

    01/05/2016 04:06PM

    It is worth also considering the issue of sustainability since the parties signatory to the Paris Accord are aligning against greenhouse gas emissions reduction of 80% plus over about the next 10,000 days. Leading corporations are already publishing their 1000 day targets and these naturally are taking significant bites out of supplier ghg emissions. An example is the Adidas 2020 target with 30% reduction at strategic suppliers. The insurance industry is particularly vulnerable to the impacts of climate change, with global natcat losses recently exceeding $100 billion and estimates in the industry of potential annual losses of $1 trillion if global action is not taken. The insurance industry is directly in the line-of-fire of climate change financial repurcusions. Procurement is a critical function in enabling the positive reponse required (since global supply chains are where most of global ghg's are commissioned). Building sustainability into the new procurement function would likely be an important consideration. Tools to predict where ghg savings can be made through suppliers are available; eg see the case study at http://tinyurl.com/z4u7avp

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    Ebony Hussey Hi Michael, thank you for your response.

    I will certainly take a look into the case study above.

    Thanks again,

    Ebony

    03/05/2016 10:43AM

  • Anthony Samaniego

    29/04/2016 05:03PM

    I recently read a book, more geared towards launching an indirect spend focus, but it very well might be helpful. It outlines a lot of the processes involved for a very fragmented/decentralized purchasing function. The book is called Managing Indirect Spend (Amazon link - http://www.amazon.com/Managing-Indirect-Spend-Enhancing-Profitability/dp/0470886889).

    The book is going to be more specific to what you will need to be effective and add value to the procurement function, but as everyone else has already mentioned, establishing processes to roll out to the rest of the organization will be key. I've worked with a few other procurement & sourcing professionals that went through something similar and getting the executive team on board was priority #1.

    I'm happy to hear that IT is on board, as that group and Marketing are typically the last two groups to really buy-in to procurement being a value-add tool for them. Focusing on general "corporate spend" to drive some immediate "quick-win"results may help ease your way in with other departments.

    Recently I've come across more cloud based procurement software that functions as a P2P process tool, eAuction platform and more. Unfortunately, I don't have any experience using the software to give you insights on functionality.

    Best of luck with the undertaking! Feel free to reach out if you'd like to chat more about anything I've mentioned above.

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  • Ebony Hussey

    28/04/2016 09:24AM

    ...

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  • Pooja Pewekar

    28/04/2016 08:48AM

    Hello Ebony, this might interest you http://bit.ly/1QzUnyU.

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    Ebony Hussey Hi Pooja - that looks interesting. Thank you!!

    28/04/2016 09:29AM

    Pooja Pewekar Do send your questions to Emily at [email protected]

    28/04/2016 09:56AM

  • Philip Ideson

    28/04/2016 12:51AM

    First and foremost, what does your organization want or need from a procurement function? I would always start there. Too often we build things in isolation because it is what we THINK our companies want, based on a notion of what we know is best-in-class. However, what is important to your company? Is it delivering cost savings? Driving compliance? Mitigating Risk? Facilitating growth? All would require a different approach.

    I think only when you have alignment with your leaders (executive and functional) over what they want from procurement can you start to build something that meets their needs. I have an Art of Procurement show that is going live on Friday this week discussing this very topic as I talked recently at a conference about it. However, I'll link up to the audio from the show here which is a summary of the presentation I gave: (http://traffic.libsyn.com/artofprocurement/EP49_Strategic_Governance.mp3). The full presentation including a screencast will be available at http://artofprocurement.com/governance from this Friday (Apr 29).

    I hope this helps!!

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    Ebony Hussey Hi Philip,
    Thanks for responding - there are several different targets - however I would say improving efficiencies and mitigating risk would be top of the list.

    Both of which obviously drive savings and ensure value for money is being achieved.

    Processes need to be streamlined, we need to work with suppliers to ensure we are ahcheiving the best value for money from our contracts and as I am looking into the IT spend first I need to ensure we mitigate the risk of being incompliant (software wise) and avoid audits from suppliers which could lead to huge fines!

    I think this alone has justified the reason why this is so important to my orgainsation.

    Thank you for sending the link to your presentation - I will certainly take a look at it this evening.

    Thanks again,
    Ebony

    28/04/2016 09:12AM

    Philip Ideson Hi Ebony, it makes sense! One thing to consider is a software asset management program if you haven't already. It can be hard to demonstrate ROI but it helps mitigate the potential fines that you talked about from being out of compliance, especially from your larger suppliers such as Microsoft, Oracle etc etc. Good luck!

    02/05/2016 01:30AM

    Ebony Hussey HI Philip, thank you!

    We have a SAM system in place and have done fro the past few years - its just ensuring it is being used efficiently! Thanks again Philip!

    03/05/2016 04:49PM

  • Brian W Bowdish

    27/04/2016 06:30PM

    I see a lot of good answers based on the very broad nature of your question and description of what you are trying to accomplish. If you can share more details (without giving away any confidential information) about they type of business you are supporting and the nature of the materials / services that you are trying to bring under control, you may be able to get more specific suggestions that you can leverage to accomplish your objectives. For example, are you supporting a manufacturing operation where you need to obtain parts that are used to make products, or are you supporting a non-manufacturing operation? Do you know where your spend is going (categories and suppliers)? Also, I did not see so far any mention of the "system" that will be used to capture and process the purchase requirements from your internal users and translate those into orders to your approved suppliers. Do you have approval for staff? Will they be dedicated or shared resources? Where will you obtain that staff? There are lots of things to consider to ensure that you have the correct structure and systems in place as well as the correct policies and procedures.

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    Ebony Hussey HI Brian,

    Thank you for your response.

    I take on board your comments.

    I work in insurance and am currently looking in to IT.

    I am currently undertaking some spend analysis as I do believe it is important to look at and have an understanding of what the organisation is spending and where before you can implement any process. I'm hoping this will also highlight some "quick wins".

    As for a system, again this is something I am open to suggestions. Due to the nature of the business I do not think I can look at a large end to end system such as Oracle quite yet so I am looking into smaller providers, in particular a contracts/ supplier database and a tool which will allow us to create requisitions, and raise and record purchase orders as a starting point.

    I have approval for staff, and am hoping once I have more of an understandning of our spend I will be able to put some figures to paper. HOwever I have stressed that we will require some experienced staff rather than fill the vacancies with internal vacancies who know the business but not procurement!

    Thanks again Brian,

    Ebony

    28/04/2016 09:25AM

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