Big business, small Procurement functions.

Big business, small Procurement functions.

Administrative, firefighting, servant, coordinated, market expertise.

Which one of these phrases fits your procurement function?

As discussed in our previous article, comparing what finance and procurement expect of the procurement function, and the difference between small and large organisation procurement teams; we explored how there is a need to focus on the long term, strategic development, alongside the basics of cost reduction and low-level business needs.

Your organisation might turn over a large revenue, with many employees, however, your procurement function might be experiencing the same maturity as a far smaller organisation.

What gives?

It’s to do with how procurement maturity and strategic alignment are linked.

Grosvenor distinguishes five levels of procurement maturity, ranging from ‘low level’, to ‘well established and integrated’ (and an associated maturity score):

  1. Foundation (0 – 1)
  2. Emerging (1.5 – 2)
  3. Established (2.5 – 3)
  4. Strategically Executed (3.5 – 4)
  5. Fully Integrated (4.5 – 5)

Where do most businesses in Australia land?

Surprisingly two-thirds of respondents achieve an emerging or established capability. Only 4% indicated that their procurement team’s strategic alignment and its maturity are fully integrated.

Smaller procurement teams are more likely to have a low procurement maturity, with 71% of these organisations achieving Foundation or Emerging levels of maturity.

Organisations with a higher procurement spend typically achieved a Level 3 for the maturity of their procurement function.

All up, Australian businesses have plenty of room for improvement.

If you work in healthcare or educational organisations, typically, these industries achieve a lower maturity, whereas government and manufacturing industries typically have a higher level of procurement maturity.

Procurement is more optimistic about its maturity than Finance. And that’s the fact.

25% of finance respondents are of a view that procurement is more of a servant to their business with moderate levels of coordination, whereas only 16% of procurement respondents would say the same.

Most procurement professionals would rate their organisation as achieving level 3, where procurement is an established function, that understands its business requirements and has early engagement with the business.

There is a clear gap in Australian procurement teams, and their ability to link their strategic alignment and maturity; so where does your organisation sit?

2018 Procurement Study

What Finance can (and should) expect of Procurement

What is the 'value' of the Procurement function?

A study comprising respondees from 91 organisations, 42 from a Procurement angle, and 38 from a Finance angle.

So, what is reasonable for Finance to expect of Procurement?

  • Finance and Procurement often have different views of what it takes to implement the organisation's strategy. And the two are regularly misaligned in what outcomes they expect of each other.
  • Explore the relationship between Finance, Procurement and the rest of the organisation, beyond the various opinions you might have heard at the odd conference.
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