The Center Led Procurement Model – The Hub of the Organizational Wheel
It’s a key challenge for organizations around the world.
How do procurement and supply chain teams move beyond savings to drive value and revenue growth for the organization?
In the quest to maximize total value for your organization it’s an often overlooked but key focus area. There exists significant operational savings AND revenue potential that requires a deep dive into your procurement and global supply chain operations.
There are many models and organization designs out there to evaluate and deploy within your organization. The Center Led Procurement (CLP) model is our preferred procurement organization design and operating model. The center led procurement model is built on cross-functional teams led by the sourcing and procurement organization. These teams represent the different areas of your organization, aligned by the why, what and how the organization spends its money.
As we like to say, a center led procurement model can provide procurement and supply chain teams operational freedom within a framework. As always, we encourage some organizational prototypes to try the model and test drive it, to see if there is a strong fit for your organization.
The Six (6) Benefits of the Center Led Procurement Model
What are the Long Term Benefits of the CLP Model?
Benefit 1: Global standardized supply chain processes focused on revenue AND savings:
A procurement Center of Excellence (COE), helping to guide the center led procurement process, globally. The process is managed in a coordinated (not controlling) way. The framework creates the basic business processes with local input and helps to standardize how your supply chain works globally. Coordination, consistency and standard work are the hallmarks of the approach. This drives the team (over and extended time period) to understand how their supply chain approach can migrate from delivery of widgets or services to directly impacting the net margin revenue by accelerating speed to market for your organization.
Benefit 2: Local Execution for Spending:
The center led procurement model allows flexibility for the local teams to work within a framework. CLP also provides flexibility for local resolution and execution of matters that can best be handled in the local region and by your local teams.
Benefit 3: Shifting focus from tactical to strategic:
Over time, as the processes and technology build out, the organization can make a decision to shift resources away from the tactical activities, planner-buyer-expediter to a solution sourcing approach. Solution sourcing at its essence moves sourcing strategy to from components to full system solutions to solve customer challenges.
Benefit 4: Repurpose of budget for re-allocation of critical resources:
Understanding the organization challenges and building the internal business processes frameworks allows your team to “give back” to the organization. The give back elements manifest in areas of increased efficiency and flexing up and down staff to support changes in the business environment.
Benefit 5: Reduces operational risk:
The CLP approach of managing in a coordinated (not controlling) way helps to allow time to focus beyond operation. Center led procurement gives time to look at Risk and Resiliency strategies to help with alternate/dual sourcing and critical supply chain analysis for weakness in the supply chain.
Benefit 6: A catalyst for Supplier Enabled Innovation and Open Innovation Initiatives
The CLP framework will become a key catalyst for Supplier Enabled Innovation® and Open Innovation, to which we will write more about in an upcoming article. Supply chain teams with a focus on total value evolve to include deep strategic thinking applied to procurement supply chain and overall business operations.
This approach educates the team to concentrate on how to save money for the organization and operate to a centralized model that optimizes efficiency. Then there isa a step up in the strategic thinking to a maturity level where the supply chain and procurement organizations can help develop business growth models for your organization.
The center led procurement model builds and strengthens your team capability, supplier relationships and can maximize deal flow and generate long-term positive net margin revenue growth for the organization.
The Center Led Procurement Model Powerful Proof – Does it Work?
Does CLP work? You bet it does.
In one case story, with a $1 Billion Privately held CPG company, the structure helped to drive a portfolio of business processes and projects that identified 10% Year over Year Savings Opportunities.
In a second case story example, with a $3 Billion dollar publically traded organization, CLP techniques combine with Design for Cost methodologies can also capture opportunity quickly. The client was able to identify $10M of actionable savings and revenue acceleration opportunities in a six (6) to eight (8) week period.
The methods and strategy applied in a third case story and over a multi-year period, supported a Fortune 500 $6 Billion organization, has helped to deliver over 4,000 savings projects. The full scope of activities resulted in $350M in savings and accelerated revenue harvest of new product introduction of $50M. Speed to market also increase, with a specific product development harvesting first year sales after product launch two years faster than compared to previous initiatives.
As we stated previously, a strategically aligned and highly trained procurement organization, with proper foundational education, business systems, tools and technology can be the functional group to harmonize, scale, solve long-term challenges, and maximize total value for the organization.
Ready to Learn More and Explore Next Steps?
To learn more about how The Innovation Garage® can help support your plans for Center Led Procurement and Supply Chain with our three (3) phase approach, blended education delivery, and the supporting tools and technology to help.
Take that first step by reaching out to us here or drop an email to [email protected] or check out our events pages to learn more or schedule a private session with us.
At The Innovation Garage®, we help organizations grow. Providing education, tools, technology, and expert consulting in change management for strategy, innovation, and supply chain. Guiding leaders from organizations across the world to intentionally self-disrupt their offerings and organizations. We deliver world-class education, tools, and technology on how to craft business operating systems focused on long-term profitable growth.
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