The best team structure in Procurement is...

There’s a lot of advice out there regarding the “best” procurement structure. What should you actually be considering?

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Tuesday, October 15, 2019

There’s a lot of advice out there regarding the “best” procurement structure. What should you actually be considering?

Next to reverse auctions, the easiest way to start a lively conversation in procurement circles is to bring up the debate between centralized vs. decentralized structures. A recent article in Spend Matters does a nice job summarizing the issue and its history.

As with anything, where you stand on this topic almost certainly depends on where you sit. However, if you want to make a decision that is truly best for your organization in the long run, ask yourself these questions:

  1. Mind the essential tension – The core tension between centralization and decentralization is control/scale vs. flexibility. The more centralized, the better the control and ability to apply corporate-level priorities. The more decentralized, the more able local actors are to cater to their customers and be responsive. At the end of the day, it’s always a balance.
  2. Beware buzzwords and trends – For example, terms such as “hybrid structure” or “center of excellence” gain currency at times without really providing actual prescriptions. If you think about it, any place that has unique skills could be termed a “center of excellence”. My barber is a “center of excellence” at cutting hair but that doesn’t necessary provide him with a durable competitive advantage. Above all, resist the urge to move to the newest shiny object.
  3. Technology helps – But doesn’t solve everything. One of the great benefits of automating your procurement systems is that it allows you to reduce the wild swings of the pendulum between central control and local flexibility. Technology improves visibility and compliance while still keeping decision authority where it belongs.
  4. Do what works for you, regardless of the pack - As noted in the Spend Matters article, many organizations increased centralization after the financial crisis to respond to risks. This might have been the right answer for you, but it might not. Keep your focus squarely on what matters, your needs, rather than what’s going on around you.
  5. Everything’s a mix – Unless you’ve gotten everything being purchased at corporate or, at the other end of the spectrum, no corporate-wide budgeting, then your structure is a mixture of centralized and decentralized. As it should be.

As we’ve mentioned in the past, one of the great privileges of working with so many world-class customers is that we get to see many different approaches in action over a long period of time. It gives us a unique view into what works and what doesn’t. Make sure to leverage that experience when working with your Scanmarket team.

As always, don't hesitate to contact us or visit our website for further information.

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