Procurement Intelligence Unit

In May 2009, I met the Procurement Leaders Advisory Board to share the Procurement Intelligence Unit's business model pre-launch. As well as presenting our vision of how the PIU would help maximise the value and impact of procurement within our members' businesses, we also shared some of the projects we proposed kicking off with. One of these was to develop a standardised skills/competency framework for the procurement profession, as we felt the capability of the people was the key differentiator between the leading procurement functions and the rest.

We had done our home work and researched the other frameworks out there; we felt there was a good business case for the project and we hoped to get the Board's support. However, we had naively made one big assumption - we had not verified that it was the skills of the procurement team that was the differentiator. So the Board suggested that we prove our assumption right or wrong before then kicking off the project. They kindly offered to give me a list of what they believed were the top twenty leading procurement teams.

So I went back to the team and shared the Board's challenge - to identify what differentiated the leading procurement functions from the rest. In itself the challenge did not seem that challenging; we could simply survey these companies and find out why they stood out.

But then the magnitude and complexity of the task really became apparent. Could all these companies be the leaders in every part of procurement? Could you really compare a bank and a FMCG company? Doesn't the internal and external business environment have an influence on the capabilities of the procurement function?

Clearly we needed to clarify our assumptions, but this was more than a simple survey and series of telephone interviews. We would need to do a detailed analysis of these companies' capabilities and then relate them to the business needs, performance and environment - a project that could take months, if not years, of research time.

I shared my predicament with Neil Deverill, who chairs the Advisory Board, thinking he might have the answer – and so he did.

The answer came in the form of his former head of strategy at Royal Philips and Anglo-American, a gentleman by the name of Ian George. Ian, over the last 15-year period, had been developing a continuous improvement model and methodology that answered all our questions.

Can a company be the leader in all aspects of procurement?

Yes, it's possible. But, more realistically, an organisation will excel in the areas of procurement that will have the biggest business impact.

Ian's approach: His model views procurement as a system made up of 17 different modules, ranging from the strategic sourcing process to the supporting business enablers. Rather than focus on processes, the models looks at maturity, based on capabilities. Additionally, as the model factors in the interdependencies, as you look to improve your proactive supplier management capabilities, you are guided on the other modules, which are directly related to the improvements that need to be made.

Can you compare companies from different industries?

Yes. But the type of business and its specific commercial environment will define business priorities for that particular organisation, thus which procurement capabilities are important.

Ian's approach: By linking business priorities and the ways procurement can support these needs into the model, it will ensure that the development of the procurement function is aligned with the business' needs.

Since meeting Ian 18 months ago, my team has been busy working to develop the framework into a toolset and methodology that an organisation can use to steer its procurement strategy and develop a continuous improvement plan. Earlier in the quarter we were pleased to launch Procurement GPS - the end result of years of academic thinking and corporate know-how consolidated by Ian, and subsequent efforts of the PIU team, with member feedback, to bring this together and launch Procurement GPS to market.

So, why the name? Procurement GPS relates to the satellite navigation system, providing, literally, a global positioning system for procurement, allowing a business leader to understand where you are, where you need to get to and, most importantly, how you get there.

Our analysts are now using the Procurement GPS framework to identify what more mature organisations are doing to get to the high levels of maturity in each of the different modules. The first of these reports, which launched last month, took a detailed view of how procurement functions were achieving organisational alignment, and is shortly to be followed by a report on talent management.

The feedback from our members using Procurement GPS has been great and, hopefully, we are beginning to answer the challenge laid down to us - to work out what differentiates the best from the rest. The best are able to target key stakeholder needs and make these procurement's priority. They are also able to follow through with a transformation in processes that will deliver sustainable levels of performance. All of this has to be underpinned by the initial theory - that it is people that make the difference. So, given the rapid success of GPS, we have started working on a training portfolio that will develop procurement practitioners into professionals who are able to deliver differential levels of service to the organisation.

Are skills the key differentiator? Put simply, we still don't have the final answer yet, but we realise that once the capability improvement gap is identified, the employees' skills gap needs to close in parallel. Thus, we will be developing the skills framework as part of Procurement GPS, meaning organisations will now be able to link the continuous improvement of the function with the personal development of the procurement team.

We are really excited to introduce Procurement GPS to the procurement community and look forward to taking the journey to procurement excellence with our customers.