Best Practices – How to Transform a Fractured Procurement Organization into a Centralized Procurement Leader.

In past articles, I wrote about how to incorporate procurement into your organization.  In that article I discussed that the three key ingredients for success were; Support from above, a strategic vision, and embracing process rigor.  Regardless of how your procurement organization is structured, these three basic ingredients are still essential for success.

Transformation of your procurement organization (away from localized procurement towards centralized procurement) still requires these three ingredients but the transformation process requires a bit more.

Recently, an article about procurement transformation drew my attention to a Company whose Directors of Supply Chain demonstrated a sound understanding of how to drive this essential change.

In an article published by Supply Chain Quarterly, the spice company McCormick is featured for it’s successful transformation from a fractured regional procurement organization into a modern mature centralized procurement organization.  Their journey through this process is an example of management excellence.  Today I want share a few key take-aways from their story.

Like many organizations, McCormick’s procurement system was immature and fractured.  They were not aggregating their spend across categories and procurement was viewed as a resource not a strategic partner.

When the Company shifted it’s strategic focus towards global expansion and the organization was challenged to achieve savings of over $400 Million, McCormick’s global vice president of procurement saw an opportunity to transform the procurement system.

The first step in the transformation process was seeking and receiving top level support.  McCormick’s VP of Procurement went right to the CEO and secured his approval for the new vision.  The new vision included a global category management team supported by regional procurement teams and a dedicated team to enable technology and analytic support.

While all of this sounds impressive it’s still not the best part.  All organizations who seek to centralize procurement develop structures similar to McCormick, but the brilliance of their success is in the way these teams were formed.

Building Momentum

One of the ways that a transformation like this can fail is that Companies try to do too much too soon.  McCormick’s management recognized that a transformation such as this needed to have momentum behind it, so they did not rush to implement a new structure forced down by upper management.  They took time to plan it and they engaged each and every business unit and each and every geography to ensure they had buy-in from all sides.

Develop People

The other key to McCormick’s success was that they recognized that people needed opportunities for growth.  Growth comes in many forms and McCormick allowed for growth to happen in all its forms.  From investments in internal education, to matching up internal staff with new roles, McCormick gave their people various paths to grow into the new structure.

Communication

Communication is a key to success in everything we do, but when launching a transformation such as this it’s even more important.  The article discusses how McCormick established clear channels of communication to ensure alignment and to avoid duplication of efforts, but communicating wins is another great reason to focus on communication.  Celebrating successes not only supports the first two factors, it builds morale and reinforces the organization’s overarching mission.

Closing

McCormick says it has completed it’s transformation.  Since their transformation, McCormick reports a 250% improvement in savings over the previous year.  That adds up to $100Million in savings.  Beyond the hard metrics, they also report that procurement now enjoys a much more strategic role within the organization.

I’m thrilled about McCormick’s success and find their approach to represent a best practice example of how to transform a fractured procurement organization into a centralized procurement leader.

What about you?  Have you been part of a transformation in your Company?  Was it successful?  Did you follow a similar path?  Tell me your stories.

Thanks for reading.  If you enjoyed this content, please feel free to browse my previous articles and please like, share, comment, and subscribe.  This helps promote my content and is greatly appreciated.

 

 

 

 

 

 

 

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