How to Optimise Procurement Processes for Better Business Performance

To grow and ensure optimal performance, businesses must constantly improve their processes. This involves making them more agile, robust, faster, and reliable. The challenge is eliminating processes that add little value or cause waste, while enhancing the quality of results. Though there are various approaches to process improvement, here’s one that any procurement department can implement.

Step 1: Conduct a Diagnosis

The first step is to assess the current situation by examining, analysing, and evaluating existing processes. The goal is to identify weaknesses, dysfunctions, bottlenecks, and redundancies—essentially any issues that could impact productivity, quality, or overall efficiency in the procurement department. This analysis should cover the entire supply chain, from supplier selection to contract management and order placement, while ensuring processes align with the company’s broader strategy.

This diagnostic work involves direct observation, interviews with employees to benefit from their field experience, and reviewing existing documentation. It’s crucial to understand the needs, pain points, and expectations of stakeholders. José Gramdi, a researcher and author, emphasises this: “We cannot lead a team, a company, or a workshop into improvement or transformation without the involvement of the directly affected parties. Putting people at the heart of the system is a major foundation of continuous improvement. Managers, directors, and shareholders must trust their teams’ intelligence and problem-solving ability.” This helps create a comprehensive picture of the department’s operations.

From this, you can identify the various stages of processes, stakeholders, and areas for improvement. Next, set objectives for optimisation: reducing transaction costs, improving supplier performance, or optimising supplier contract management. These objectives should be SMART—Specific, Measurable, Achievable, Realistic, and Time-bound. This will help determine the key performance indicators (KPIs), such as the ROI of the procurement function, average transaction execution time, or the percentage of purchases made outside of contracts.

Step 2: Rethink Your Processes

Once the diagnosis is complete, it’s time to (re)build the processes. The goal is to make them more efficient and aligned with company objectives. Some steps may need to be eliminated, others merged, new ones added, and the order of tasks adjusted. Procedures may also need to be standardised.

To achieve this, the team can use various proven process improvement methodologies: Six Sigma, Just-in-Time Management, Kaizen, and Lean. Ivalua, a global leader in expenditure management solutions, explains the benefits of the Lean philosophy: “Lean in procurement and supply management can improve workflows by reducing time and eliminating waste; cutting costs while improving quality; enhancing supplier performance; focusing on value-adding activities; and strengthening the strategic focus of procurement.”

Automation also plays a key role in process improvement. Take advantage of technology to automate repetitive or manual tasks. A McKinsey study revealed that 50-70% of tasks in procurement could be automated. Most procurement departments have started automating their Procure-to-Pay (P2P) processes using e-procurement solutions. These systems can handle tasks like order placement and invoice matching. In the future, procurement teams may further enhance processes using Robotic Process Automation (RPA) or Intelligent Process Automation (IPA).

Once the new processes are designed, it’s important to present them to key stakeholders—both within the procurement department and internal customers. This is an opportunity to show how processes will work after the improvements. Using creative and participatory techniques can involve them in the process, gather feedback, and refine the changes. It’s also essential to validate the new processes through simulations and discussions to ensure employee engagement with the changes.

Step 3: Implement the Change

The third step is implementing the validated processes. This should be done thoughtfully and gradually, with a focus on change management. Introducing new processes often requires information sessions or training for stakeholders. If the changes involve new digital solutions, consider providing tutorials to ensure smooth adoption.

After the changes are implemented, it’s vital to monitor and measure performance. Dashboards can help track processes in real-time, identify inefficiencies, and enable quick responses. The project team should also gather ongoing feedback from stakeholders to ensure the processes are working as intended. This continuous feedback loop allows for necessary adjustments and ensures the improvement process remains dynamic.

Continuous Improvement for Long-Term Success

Business process improvement is a transformative approach that can significantly impact an organisation’s performance. For success, it’s important to rely on the right tools, maintain constant communication, and foster a culture of continuous improvement. By collaboratively streamlining processes, the organisation can reduce errors, increase efficiency, and improve customer satisfaction in the long run.

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