Procurement centers of excellence are becoming more prevalent in organizations that seek to refine sourcing and lower procurement costs. These internal resources are able to build cutting-edge procurement functionality into the day-to-day operations of enterprises of all sizes. Here’s how a procurement center of excellence works and how to start creating your own procurement COE.
What is a procurement center of excellence?
First, how do experts define “center of excellence”? A procurement center of excellence (COE) is a specialized team that provides leadership, training, and support to improve procurement best practices across an organization.
A procurement center of excellence serves many purposes. This team of dedicated specialists can ensure the organization uses the most up-to-date procurement best practices, keeping the leadership team informed of the latest trends, tools, and research. Procurement centers of excellence are able to take a strategic, rather than a tactical view of procurement. This team is tasked with constantly seeking new ways to optimize and refine the procurement function to save money and help the business run smoothly.
What are some of the responsibilities a center of excellence can take on to improve procurement?
Advantages of a procurement center of excellence
A procurement center of excellence brings a new level of expertise to an enterprise, providing the guidance needed to bring down procurement costs, build long-term relationships with suppliers, and optimize the supply chain. A COE offers the following business benefits:
Centralized procurement knowledge
Often, procurement expertise is decentralized, meaning different stakeholders throughout the organization have different levels of understanding about procurement processes and best practices. This decentralized knowledge contributes to maverick spending and poor compliance.
A procurement COE is well-versed in the organization’s procurement processes and procedures. It can act as the main point of contact for managing supplier relationships and targeting rogue spend. This allows stakeholders within the organization to focus on functions other than procurement and cuts down on waste.
Implement procurement technology
A COE can also take the lead on implementing the latest procurement tools and platforms. Given that 70% of digital transformations fail, according to McKinsey research, it’s crucial to assign a dedicated team of experts to oversee implementing new procurement technology.
Not only can a COE source and vet the best software solutions, but this team can also provide training and support to implement the program successfully. Often, introducing a new tool isn’t enough to reduce maverick spending or encourage better supplier diversity; some degree of behavior change is also needed for the organization to evolve. Procurement centers of excellence can take on the leadership and training role to ensure these changes stick.
Align with organizational goals
Perhaps the biggest benefit of a COE is that it can ensure your procurement goals align with overall organization-wide objectives. For instance, if the organization makes it a company-wide priority to invest in diversity initiatives, the COE would be tasked with improving supplier diversity. This ensures that procurement goals are relevant and ladder up to the overall success and growth of the enterprise.
How to create a center of excellence
It’s one thing to set up a procurement COE, and another to empower a COE to positively impact the success of the organization. Start with these steps to make sure your procurement center of excellence is able to work effectively.
Define the mission of the COE
Provide a clear mandate to the center of excellence. What is the mission, vision, and goals of your procurement center of excellence? Define the purpose of the COE, as well as a clear set of measurable goals and the scope of work. Align the goals with the overall goals of the organization to get buy-in from senior stakeholders.
Get funding for your COE
Funding is crucial to empowering the center of excellence to achieve its mission. Without a discrete budget, a procurement center of excellence will struggle to have impact. Keep in mind that any funds you invest in the COE are really funds you’re investing back into your business. The procurement COE should be able to demonstrate how its efforts will provide returns in productivity, cost savings, and efficiency.
Provide staff, marketing, and more
Finally, make the center of excellence operational by hiring procurement experts, implementing procurement tools, and internally promoting the COE. Include members of key departments in the process of bringing the COE to fruition so that they can become familiar with the center’s mission. Create a set of measurable KPIs that can demonstrate whether your COE is meeting its goals in a timely manner. Treat your COE as you would any other department, and help the team integrate with other key business functions.
For more insight into how your organization can improve sourcing and procurement, check out Fairmarkit’s blog, The Source.