Recently, I was invited to speak at the 10th Annual Procurement, Outsourcing & Vendor Management Forum on optimizing your procurement, outsourcing and vendor management processes and minimizing risks to your supply in a volatile marketplace. As I got down to preparing for it, I thought of starting with the fundamentals – the raison-d’être of procurement.

At the highest level, the goal of procurement is to obtain the right product or service, at the right quality, price, and place, with utmost efficiency and speed. And, very simply, since procurement directly impacts Cost of Goods Sold (COGS), an efficient and effective procurement function makes an organization highly competitive and generates significant shareholder value.

But, why do most organizations struggle with getting procurement right? Despite e-procurement systems having been around for more than a decade, even best-in-class organizations “max-out” at 84% of spend under management, while average organizations clock 70% of spend under management.

To my mind, the journey to best-in-class in procurement transformation starts with these Seven Golden Steps:

1. Possessing a unified spend category taxonomy
2. Leveraging end-to-end e-sourcing and e-procurement technologies, integrated with accounts payables
3. Enabling granular spend visibility, which in turn drives strategic sourcing opportunities
4. Proactively driving demand management as part of the category management process
5. Defining a rationalized set of transactional purchasing and payment processes that are then explicitly mapped to spend categories and/or associated suppliers
6. Driving compliance management so as to ensure savings are realized, and
7. Managing supplier performance.

I will be going into the details of these Golden Steps in my talk at the seminar, and will subsequently expand on them here. In the meantime, I would love to hear your thoughts!