A successful procurement organization can’t function in a vacuum. Even in the most centralized procurement organization, with dedicated sourcing specialists and buyers, stakeholder buy-in is key to success. The tension between procurement organizations and their end users is legendary. The end user wants to buy what they want, from who they want, when they want it. Procurement needs to ensure that preferred suppliers are used, polices are followed, and that the organization is continually delivering incremental value on their purchases. In some organizations, the two groups have reached a truce by giving that buying power back to the business, albeit with several strings attached. In a fast-moving, lean organization, this allows procurement to focus on strategic improvements and supplier negotiations.
Procurement leaders must be cognizant of their industry when considering a decentralized approach. While it has been successful in several consumer product companies, because of the fast-moving nature of their business, it wouldn’t work so well in a highly regulated industry or organization such as the federal government, where procurement can take on a quasi-legal role. If power is to be given to ‘the people’, how do you engage stakeholders to take responsibility for their own spend while ensuring responsibility and compliance?
Implemented properly, this structure has benefits to the procurement group and the whole company. With a decentralized approach, procurement has more time to negotiate contracts with suppliers, analyze spend for additional savings, and drive value throughout the corporation. The front line managers at the plants are empowered to make key purchasing decisions as needs occur, and they know policies and procedures to ensure their purchases are completed properly. If there’s an issue with a supplier or a delivery, the line manager can involve procurement and get back to his day job.
When transforming into a decentralized model, leaders require comprehensive change management and training strategy. The business users must know exactly what they will be responsible for (Read RACI analysis) and the time commitment of taking on this responsibility. When the end user is physically detached from the central organization such as a storeroom manager in a plant or a marketing brand manager in another country, this communication becomes paramount. Utilize single points of contact and accountability within business areas to ensure that the lines of responsibility and communication are always clear. Procurement should maintain oversight of vendor interactions throughout the process, and be ready to step in if communications breaks down.
It requires a two-way discussion between procurement and the end user to ensure that the end user is bought into compliance and existing protocols. Procurement must do their part by adequately responding to the needs of the business. Over time, this approach allows everyone to do more with less and focus on providing value in the ways each knows best.