Procurement Transformation – Best Practices and Notes from the Field

Interest in procurement transformation is surging. A discussion of what’s driving demand, what approaches work best and real-life examples from The Hackett Group’s recent procurement transformation engagements, with Director Natalie Henfrey from The Hackett Group’s Procurement Transformation practice in Europe and Principal Tom Kellaway of The Hackett Group’s Benchmarking practice.

Welcome to The Hackett Group’s “Business Excelleration^® Podcast,” where week after week we hear from AI consulting strategy experts on how to avoid obstacles, manage detours and celebrate milestones on the journey to world-class performance. This episode is hosted by Natalie Henfrey, director in Procurement Transformation at The Hackett Group. She is joined by Tom Kellaway, principal in The Hackett Group’s Benchmarking practice.

Seeing a real surge in demand for help with procurement transformation through Gen AI, The Hackett Group decided to dedicate this podcast series to discuss the topic in-depth. To begin, Tom recaps a few key issues recently released in the 2024 Key Issues Research podcast episode. In terms of procurement, organizations face inflationary price pressures, supply chain shocks and turmoil within the geopolitical environment. At the moment, procurement organizations and chief procurement officers are focusing on spend reduction, supple assurance and inflation mitigation linked to those external factors. On the internal side, they are focusing on evaluating their operating model and agility and analytics.

Clients are looking to refocus their people in a procurement function that can better deliver the business’ strategic priorities. Tom shares how The Hackett Group can help with this. First, he emphasizes the wide breadth of organizations they work with across size and industries. Thus, there is no one-size-fits-all solution to these client challenges. Among Digital World Class^® organizations, The Hackett Group has noted the cultures they have built in terms of transparency, ownership, consequence management and accountability to drive high performance. The Hackett Group helps organizations of all sizes address the gap between the cost of business operations and the addressable business opportunity. They also offer creative plans to reach target levels by refreshing procurement operating models, which involves understanding the ambition and vision of the organization. They help organizations plug the gaps between their current and future ambition.

Next, Natalie and Tom highlight a few real-life examples of The Hackett Group’s procurement transformation work. For example, Natalie worked alongside a multinational pharmaceutical company to refresh their procurement strategy and build out a digital road map. While they had a digital road map, adoption and funding were major issues. Together, they combined a data-based approach to uncovering the issues with hypotheses for potential solutions. Knowing technology investments were needed, the solutions came down to making more of the things the client already had. Ultimately, they demonstrated the continued value of digital tools to improve procurement effectiveness by refreshing their digitization strategies and seeking funding with increased confidence.

Tom worked with a company of a similar scale, but in a different industry with a complex product. For them, procurement was initially seen as a purchasing function. Thus, there was a lack of confidence in procurement’s ability to provide the right insight around product input pricing. This made the business uncompetitive and regularly lose bids, and created issues around delaying product quality and delivery. If they could get it right, the opportunity for procurement was very powerful for them. First, they aimed to establish consistency across the entire organization, including procurement. Secondly, they provided education around the potential for good procurement in the organization. Having that stake in the ground allowed them to build the initiatives they needed to have more certainty around the timeline, benefits and cost of those benefits. The company shifted from being a traditional purchasing organization into being a more strategic business partner. Today, they are still on that journey and working with The Hackett Group’s Advisory Services to drive their transformation journey at their own pace.

Finally, hear the importance of taking a structured, fact-based approach to procurement transformation. Although there is currently a lot of buzz around artificial intelligence, there are even more important organization functions to be ironed out beforehand, such as sorting out data, to best leverage emerging technologies and automation.

Time stamps:

0:49 – Welcome to this episode hosted by Natalie Henfrey.

1:22 – Tom shares a few highlights from The Hackett Group’s 2024 Key Issues research.

3:14 – How can The Hackett Group help?

6:14 – Plugging the gaps between their current and future.

7:00 – Natalie’s work with a multinational pharmaceutical company.

8:30 ­– Tom’s work in procurement transformation.

12:30 – Sharing final thoughts and takeaways.