If you are in purchasing or supply and have the following symptoms, this article is for you:

1. You receive negative comments from internal areas saying that you are “slow” or “expensive.”

2. You hear people say that the purchasing area doesn’t know how to negotiate and anyone could do it better.

3. Internal customers say you don’t understand the business, so they have to negotiate with the supplier.

This article is built from practice and real actions in multinational companies, the product of facing various hostile environments where operation is the daily bread. So if you identified with one or all of the symptoms mentioned above, we give you some steps  to achieve a real transformation of the area, which leads it from being transactional to becoming a strategic supply pillar.

1. Paradigm shift

The first thing to do is  “believe the story”  and convince the team of buyers of the indispensability of their work on a day-to-day basis. Surely this paradigm shift forces a series of adjustments to be made in the structures, such as the creation of levels or roles: strategic buyer and transactional buyer, or negotiators and executors, among many other strategies that exist and depend on the size of the organization and the available work equipment .

The best way to leverage this change is through an implementation or restructuring of category management,  which  must be based on a joint and realistic construction of the decision matrix in “kraljic” purchasing management .

For this activity, the recommendation is to initially allow buyers to choose related categories. This generates trust and empathy with people. After a short period of time (no more than two months), adjustments can be made to the categorization of buyers, based on feedback and performance monitoring.

Monitoring during this period must be constant and detailed, implementing agile routines, such as, for example, a daily follow-up meeting on the purchase lines (“stand up”), focused on seeing the difficulties of buyers in the pending lines that are not have been attended to, visualize daily tasks and socialize future demands.

At this point, the most important thing is to understand the skills of the work team in terms of how they establish priorities, propose solutions, link problems and understand the business, which  allow the identification of strengths and weaknesses as inputs in the correct categorization.

2. Expense analysis

The designation of resources to  the expenditure analysis  (“spend analysis”) is the most relevant step, being  the formation of the “control tower” of the purchasing area  and is the differentiating factor . The aggregation of demand is a visual that the user areas do not have, external factors such as logistical conditions, financial costs, are the best arguments to debate why negotiation should be centralized.

The visualization of the data, no matter how succinct, has an incommensurable value with the company’s directives.

3. Sponsor within the organization

This is perhaps the most complex task:  finding an optimal sponsor within the company . An ideal position is to report directly to the CEO, but this approach can be utopian within the structure; Therefore, a middle point would be the dependence on the CFO (Financial) given that his decisions are significant in terms of investment or financing in the company.

As a measure of inefficiency in the process, it is to continue being part of a support area (“backoffice”), given that it will continue to be considered a transactional area within the company .

At this point it is important to review processes. Many times an external opinion has more weight than the internal voice, unfortunately it is a common practice, since an external advisor saying exactly the same thing that the purchasing area has more than diagnosed for a long time, has greater validity. Therefore, hiring a consultancy is a valid tool when it comes to showing the organization a migration plan.

4. Performance indicators

Last, but not least,  is the creation of indicators (“KPI’s”) that make the results tangible , generate a change in the perception of the areas of the organization in relation to the purchasing area and establish an indicator of savings quantifiable factors. , this being the most relevant aspect of management.

As transversal steps to the entire transformation process, it is to encourage the participation of the team in negotiation courses and assign part of the “script” in the negotiations that represent the most crucial decisions for the company.

In these four points, two of the three pillars of knowledge management have been addressed: processes and people.  It would definitely be necessary to adopt technologies that allow  the traceability and transparency of its management, giving visibility to other areas of the company that require it.

The best technological tool, finally, is the one that allows you to accelerate your transformation without overwhelming the processes, that adjusts to economic reality and that has the best world-class practices in supply management.