Implementing Best Practices: The Procurement Maturity Model You Won't Get From ISM
In the procurement profession, there is a broad set of external factors which directly affect organizational performance: customers, policy, staff, processes, vendors, tools, and organization. Regardless of whether the external factors are enabling or inhibiting, the procurement function must deliver value -- usually in the form of cost savings, enhanced vendor performance, and mitigated legal and operational risk. That's why the The Procurement Maturity Model (PMM) was developed to assist procurement professionals in implementing procurement best practices as a means to improve organizational performance.
One of the things the Procurement Maturity Model (PMM) facilitates [is] the process of benchmarking by pre-defining over 60 procurement best practices. These best practices may include:
- the Procurement organization involved in 95%+ of spend
- purchase orders electronically generated for 80%+ of spend
- 75%+ of spend flows through approved vendors
- 80%+ of contracts executed within 30 calendar days;
95%+ of contracts executed within 60 calendar days - Procurement staff receives 24+ hours of training annually
The model enables a gap analysis between an organization's performance and the corresponding performance of a best-practice enabled organization and, based on the gap, identifies measures and actions the organization can take to become best-in-class.
For more information on the Procurement Maturity Model and how it can help you become World Class, check out the presentation that Stephen Guth (of the Vendor Management Office blog) was going to deliver at ISM*1 (who I'm going to call a hot dog vendor of procurement certifications), available for download through this post.
*1 I'll agree that the presentation is pretty basic, but you can't tell me it's more basic than most of the material that they publish on a regular basis, or most of the presentations they accept, or that a significant portion of their audience, unfamiliar with the PMM, would not benefit from a good introduction. Especially one from an experienced practitioner and speaker who wrote the book on The Vendor Management Office.
Categories: Best Practices, rants
Tags: Stephen Guth Procurement Maturity Model Vendor Management Office ISM
As part of our discovery process, we engage the purchasing areas early on in the project to understand the specific issues relative their own business. We continually find that many customers are looking for three primary Cost Saving Goals when implementing our solutions:
1. Contract Compliance
2. Process Efficiencies
3. Spend Analysis
We are often asked to provide best practices as part of our implementation process. Each one will addressed here at a high level:
Contract Compliance – The lack of reporting tools and resources plague many of our new customers as they look for ways to squeeze budget dollars. Many of our customers are increasingly challenged to track their spend to ensure they are leveraging established contracts. We recommend that the supplier catalogs selected by the customer be focused on their top vendors for each category. Many customers are able to determine this by analyzing their current PO Volume. We also recommend that each category have a primary supplier only and that they resist diluting their spend by adding multiple vendors to each category.
Process Efficiencies – Moving from Paper to our application inherently creates a more efficient set of business processes and control points. We typically see a reduction in Requisition to Purchase cycle times from weeks to days…and even faster in some cases…In addition, the ability for each requisitioner to be able to track their request through the entire process eliminates wasted e-mails and phone calls.
Spend Analysis – Once the entity has gone live and built some purchasing volume through our application, they can track spend very quickly utilizing our “Purchase Reports”. Instituting a practice of ongoing reviews of vendor throughput, will allow the purchasing organization to leverage the data for future pricing negotiations with those vendors.
E-procurement allows an organization to step out of the mundane paper process and become more efficient in saving money through efficient process and contract compliance.
Gravity Gardener