Do You Have Enough Procurement Projects to Hit Your Numbers?
Are there worse feelings than telling the board why you didn’t meet your goals at the end of the quarter, half, or year? Probably, but it’s still not fun. Here’s how you can avoid those awkward conversations this year by increasing the number and the quality of procurement projects you find and complete.
Define your potential procurement project pipeline
The first step to hitting your numbers is identifying projects you can undertake. However, one reason procurement teams fall short of their goals is because they haven’t found as many new opportunities as they would like, leaving them with too few projects in their pipelines.
In today’s globalized procurement world, last-minute changes, demands, and breakdowns are unavoidable. Projects will fall through or suffer delays, so you can’t rely on the minimum number–or the same annual initiatives–to carry your cost savings and non-financial metrics over the finish line. Even companies that are reshoring or near-shoring deal with enough complexity to keep Procurement’s head on a swivel.
To make sure you hit your numbers, you’ll need to start by identifying and staging additional projects, preferably more than you can reasonably achieve in one fiscal year. Not only will this give you backups, but it will also give you options as circumstances change and the organization’s needs adjust. So where are all these projects hiding?
Obtaining holistic spend visibility
You can probably think of several known procurement project opportunities that you haven’t been able to launch yet because of missing buy-in from stakeholders, low visibility with leadership, or difficulty defining a measurable target outcome. But there are likely more critical initiatives and trends hiding in your volumes of indirect spend than you can imagine.
To find them, you’ll need a top-down view of your spend cube plus a way to drill down into it. The best way to achieve this kind of visibility is with a spend analytics solution that captures, normalizes, and categorizes 99% or more of your organization’s data into a procurement-derived spend taxonomy.
With it, you can explore the different dimensions of your spend and use that information to address maverick spend, negotiate better payment terms, assign more beneficial contracts, reduce scope 3 emissions, increase diverse spend, etc.
Being able to quickly surface new ideas and share the underlying data seamlessly with your spend category partners paves the way for finding impactful procurement projects and getting them off the ground. (And with a product like SpendHQ, many of those insights are automatically surfaced for you.)
Manage and refresh procurement contracts
Another core strategy for filling your pipeline with procurement projects is contract management. Contracts are your strongest tool for securing cost savings, reducing scope 3 emissions, increasing diversity spend, and mitigating supply chain risk.
But in the mix of conducting procurement’s other responsibilities, unmanaged contracts can allow the cost of goods and services to inflate, the quality of materials to decline, and purchase price variance (PPV) to find a way in.
If you regularly review and refresh your contracts, you’ll add more projects, which can help you meet your numbers in multiple ways, including:
- Cost avoidances by preventing contract issues from arising
- Cost savings as you fix problems created by lapsed or unfavorable contracts
- More effective supplier relationship management
Make opportunity ideation and creation seamless
Even with spend visibility, procurement teams can’t see everything. Sometimes, project teams outside the purchasing department will lead you to the most impactful projects. Sometimes, projects will develop over time. Unless you want your procurement team manually combing your spend data for opportunities, you need a way to bring opportunities to you.
One way is to make it easy for finance and other project teams outside the purchasing department to submit ideas. This will reduce Procurement’s workload and strengthen your relationships with other departments.
Perhaps the most important option is to integrate your procurement management process solution with your S2P suite or our spend analytics solution so it automatically creates opportunities under certain circumstances. This will ensure that your team can always respond to emerging situations rapidly instead of letting them develop into problems.
Actively manage your procurement project pipeline
Identifying projects doesn’t automatically mean you will hit your numbers. While delays and derailments are inevitable, stagnant pipelines are the leading cause of missed procurement goals.
Stagnant pipelines make procurement look and feel busy, but they limit the function to administrative and tactical work. They’re usually the result of inefficient operations and low collaboration with stakeholders.
The first way to keep your pipeline moving is to actually have one and make it transparent. If you’re managing procurement projects and their statuses in a spreadsheet or siloed solution, progress will be slow or non-existent for several reasons:
- Involved parties can’t see what’s happening
- Progress is easy to overlook or even overwrite
- Spreadsheets lack the management tools to ensure projects keep moving
Instead, leverage a solution with a transparent pipeline that keeps procurement projects moving and easy to see. With it, involved parties always know
- What goals they’re working toward
- What’s happening with a project
- When certain thresholds or status gates have been reached
Track your overall performance and improve
No matter how many projects you identify or how well you manage them, the best way to hit your goal is to monitor and evaluate your performance regularly. Otherwise, you may find yourself making progress in the wrong direction at the end of the year.
To avoid this issue, you should track your performance in a single location that everyone involved can access. This single-source of truth will allow you to compare your procurement plan with the realized results and shift if necessary.
This is also why you’ll want as many projects as possible in your pipeline. If you realize halfway through the year that your approach to project procurement management isn’t as effective as you believed, you’ll have a healthy selection of procurement projects to pivot to immediately.
Conclusion
As the past four years have made clear, Procurement’s impact now relies on far more than cost reductions and net new contracts. Risk, inflation, decarbonization, and supplier diversity are just a few of the function’s responsibilities that are growing more important every year.
We understand how difficult it is to continue providing high-level impact when the goalposts are moving. That’s why our spend analytics and procurement performance management solutions exist. Using our decades of experience as procurement leaders, buyers, and category managers, we developed solutions that help teams find and execute the procurement projects that will help them hit their numbers.
If you’re ready to see how you can accomplish more with less effort, click the button below to schedule a custom demo today. We’ll walk you through the full procurement optimization process and ensure you have the know-how and the tools to take your impact to the next level.
