Strengthen your organization with the 5 Forces
Each procurement department is unique. It is moved by the people who work there every day. Processes have usually grown historically and the quality and variety of interfaces is different everywhere. Thus it is also not surprising that the potentials of different procurement organizations and likewise the respective problem fields differ strongly.
Nevertheless, for us some fields stand out more than others. The 5 Forces are the ones that can inspire at the same time but also inhibit. We speak synonymously of design fields, because in these areas there is the possibility to become actively involved in design.
Description of the five design fields – example procurement
Clear responsibilities, clear lines of authority, regulated processes and common goals. Defining and aligning these with each other corresponds to the main task of the first field of design, Operational Excellence. In other words, we understand this to mean the constant synchronization and optimization of the company’s overall strategy and goals with the processes of the entire value chain. As a result, Operational Excellence is the guarantor for efficient and effective corporate action.
Somewhat less abstract is the second field of the 5 Forces, material group management. If a material group management is in place, it is often based on established structures and is often not very transparent. At the same time, procurement should always be able to give a statement about its purchasing volume and its allocation. A structured material group management system creates transparency and sets clear goals with regard to the procurement market, supplier structure and awarding strategies.
Hand in hand with this goes the supplier management as the third of five design fields. This involves the systematic classification, evaluation and support of suppliers and, often in the sense of smart procurement, the digital exchange of information and documents. Transparency also plays a decisive role in this area. Procurement must know at all times which of its suppliers is strategically important for it, which one still needs to be developed and which supplier currently has a critical status.
And that brings us to the omnipresent fourth design field, automation as part of a digitization strategy. Within the procurement process, there are incredibly many points of automation. However, each procurement department has to check individually which points are possible and useful for them. A goal is in each case the automation of all those recurring administrative activities, which are not directly increase in value donating and thus the focusing on strategic activities prevent.
The last organization field, the international organization, is not only relevant for those enterprises, which have subsidiaries and thus procurement departments distributed on the globe. As the name suggests, this design field is about using an optimized organizational structure and a common set of objectives to exploit the advantages of an (international) customer-oriented organization for the optimization of purchasing processes.
The 5 Forces for procurement are not the sum of the individual design fields, but together they are much more. Operational Excellence lays the foundation for the entire organization by defining responsibilities and competencies. Supplier management is based on commodity group management. Automation draws on the previously established optimal processes. In the International Organization, the design fields are rolled out internationally.
In short: if you look at the potentials in procurement through the eyes of the 5 Forces, cherry picking is the worst thing you can do. The five design fields build on each other, strengthen each other and cannot function optimally without each other.
Managing Director, ADCONIA GmbH
Consultant, ADCONIA GmbH