Purchasing: Flying blind or not – are we equipped for the future?

Your purchasing department is under enormous pressure: reduce costs, minimize risks, optimize processes, and simultaneously enable strategic growth. An impossible task within this cycle?

Considering geopolitical tensions, new regulatory requirements, ambitious sustainability goals, and the disruptive potential of AI and digitalization, the task seems nearly impossible. But how can you precisely assess the state of your purchasing amidst this complex interplay of factors? Where are the blind spots, the untapped potential? And how do you transform these insights into a clear roadmap for a future-proof and competitive procurement organization?

Multidimensional challenges for purchasing

Geopolitical tensions, new regulatory requirements, sustainability goals, the use of Artificial Intelligence, and the advancing digital transformation present major challenges for purchasing. Those responsible are required to regularly review purchasing to evolve and remain competitive. But how can you determine if the defined strategies can unfold their effectiveness, if the organization is correctly structured, if process efficiency is guaranteed, if the systems used also generate the necessary transparency, and where there are fundamental areas for improvement?

It’s not just about reducing costs, but also about minimizing risks and optimizing processes to be able to grow strategically at the same time. To do this, companies need transparency and an optimally positioned purchasing department. On the path to achieving these requirements, specialized assessments and automated process analyses come into play to identify the hindering weaknesses and derive targeted optimization measures.

Through a purchasing assessment with pre-prepared interviews and checklist catalogs, initial insights and foundations of the current actual situation can be developed. In addition, various digital tools today offer deeper and data-based insights, often already enriched with KPIs (Key Performance Indicators), which also show initial determinations and the path to a future target state. Within the scope of this article, the authors address both approaches and show what opportunities arise for companies and their procurement organization in the combination of assessment and data-based analysis support.

The purchasing assessment as a best-practice approach

The Wavestone purchasing assessment, proven across various industries, serves as the basis for a sustainable increase in the maturity level of procurement. This encompasses a holistic view of all relevant dimensions: strategy, organization, processes, and systems.

The assessment is divided into 3 main phases:

1. Initialization – Project scope and deliverables
2. Analysis – Conducting the assessment
3. Results Documentation – Recording results and linking them to KPIs

During the initialization phase, the project scope and the nature of the deliverables are refined together with the client.

In the analysis phase, existing strategies and concepts are reviewed, organizations, roles, and role profiles are analyzed, processes and workflows are recorded, and master and transaction data are evaluated. This analysis takes place on the one hand by means of a predefined structured questionnaire and dedicated expert interviews (qualitative soft facts). The discussions with the process stakeholders are the qualitative core of the assessment for all four dimensions – strategy, organization, systems & data, and processes. Representatives from strategic and operational purchasing, logistics, internal stakeholders, finance/controlling, and IT are interviewed. On the other hand, the analysis focuses in particular on system usage and system data (hard facts). Who isn’t familiar with this? Purchase orders may exist, but the data provides no or insufficient transparency. In addition, the statements from the expert interviews are verified with the help of the system data. Above all, end-to-end processes are often implemented differently than they are defined.

In the documentation phase, the results of the analysis phase are documented for each sub-process.

The analysis results are compared with best practices and benchmarks from comparable industries. Furthermore, so-called “blind spots” are identified. Together with the client, the long-term procurement target state is defined, and concrete recommendations for action are developed based on implementation measures. The measures build upon the identified gaps and potentials. They are categorized, prioritized, and placed on a roadmap that takes mutual dependencies into account. This ensures that any investments and optimizations of processes, organization, strategy, as well as systems are made in a targeted, investment-secure, and resource-efficient manner.

The final deliverable is a results documentation with the target state and recommendations for action, including a roadmap with the essential measures to achieve the target state. While the recommendations for action address the question of “how,” the roadmap provides information about the “what” and “who” in a formula so well-known that a solid project plan can already be derived via the start date and resource allocation (FTE full-time equivalent).

Continuous activities to increase maturity

A purchasing assessment should not be a one-time event. To sustainably increase the maturity of purchasing towards strategic activity in the long term, it is important to continuously monitor the purchasing process and improve it regularly.

The implementation of the measures is not included in the purchasing assessment. These can include, for example, the realignment of the purchasing strategy, the introduction of a new eProcurement system, or the switch to more efficient procurement processes. Such measures are usually implemented by the client themselves and, depending on requirements or additional technology adjustments, are accompanied and supported in their implementation by a consulting company. The results from the assessment are prepared in accordance with the principle that they can be implemented independently without a lock-in effect and with appropriate specialist resources.

At this point, it is also clarified that this purchasing assessment does not require any special tools or licenses. The consulting team has built up the methodology and the assets for the interviews and workshops over many years and, of course, has continuously refined and supplemented them.

Why Conduct a Purchasing Assessment with Wavestone?

The purchasing assessment has proven its worth across various industries, both in the past and currently. Success factors include Wavestone’s structured approach, cross-industry best-practice approaches, as well as experienced consultants with process, project management, and ERP system know-how. Wavestone also brings various project accelerators to every engagement, such as:

• Qualitative structured questionnaires
• Evaluation procedures
• Benchmarks
• Requirements catalogs
• Market overview of software manufacturers
• Templates for results preparation (e.g., Business Blueprint and Business Cases)

In the assessment, the consultants rely on already developed and adaptable templates to be able to essentially focus their time on the client’s questions and needs.

Assessment and the option of technology deployment

Experience in exchanging with our clients has also highlighted that many companies are not sufficiently aware of the economic value that their bookings in the ERP system represent for the analysis and improvement of business processes. From processes such as goods receipts for purchase orders, release of quality stock, creation of deliveries, and booking of goods issues for delivery, etc., immediate and deep insights into the execution and performance of a company can be calculated using digital analysis tools. From these calculations, the team, supported by KPIs and their own experience, immediately recognizes weaknesses such as:

• Excessive lead times and delays in procurement
• Incomplete transactions and documents lead to extra work and delays
• Process deviations and inefficiencies such as duplicate documents, deleted or canceled items
• Too many manual processes in procurement, which also bring susceptibility to errors
• Maverick Buying – procurement without relevant purchasing signals from forecast or demand planning

These operational value potentials in terms of opportunities for improvement are achieved on the one hand through the rapid identification of weaknesses, and on the other hand, the weaknesses can be quickly identified and assigned instructions for remediation based on KPIs.

Using ERP Log Data with SAP Signavio Plug & Gain

Thanks to the use of SAP Signavio with continuously updated and current ERP log data, sources of problems and deviations can be quickly identified, and thanks to formalized KPIs (Key Performance Indicators), catalogs with causes and potential improvements are also immediately available. The underlying methodology and technology is called Signavio Plug & Gain and is available to any operator of SAP ERP (ECC and S/4HANA) within the Signavio Transformation Suite. Plug & Gain allows a small team to gain deep insights into the performance of various end-to-end processes in the shortest possible time and without great personnel expenditure.

As already explained in the chapter on continuous maturity, the essential benefit for the company from digitized processes lies in continuous improvement and transformation, as well as in other dimensions:

• Simplification of configuration and master data
• Identification of automation potentials
• Harmonization of processes across the entire organization
• Replacement of special processes with software standards and the resulting availability of Machine Learning, IoT, or AI-based scenarios

In addition, findings can also be profitably used in downstream and other functions such as:

• Audit with the internal audit department and its preparation
• Internal audit, identifying process and organizational risks
• Building alternative business practices, pilot and analysis
• CIP – continuous improvement process
• M&A activities, acquisition and sale of businesses

Wavestone consulting teams, which are put together for such assessments from various specialist areas and with many years of diverse experience, not only accompany customers in the assessment activity per se, but are also actively involved in the planning and conception. This helps to lay the right foundations as quickly as possible to identify further optimizations, system and process improvements, and to implement them as innovations. Experience has shown us that improvements and savings from data-based assessments can quickly range from five to seven-figure amounts (USD, Euro) depending on the scope and size of the company. In addition, eliminated inefficiencies bring rapid benefits and also motivate the involved workforce – because improved and more efficient work processes usually also mean more meaningful business processing and ultimately better working conditions.

The Role of Process Management in Assessments

Furthermore, process- and data-based assessments are increasingly important because they also formalize access to digitized business processes. Whereas in the past the tools for this were often very complex and also insufficient in functionality, the SAP Signavio Transformation Suite now provides a selection of tools that are integrated with the SAP solution portfolio, thus also allowing for rapid onboarding of project teams. Constantly audited and updated processes, as well as simplified collaboration in process management, bring a significant increase in efficiency and quality that is unparalleled in the past.

In summary, we note that an assessment of operational processes – whether in purchasing or other business disciplines – in a larger context can hardly do without the availability of digitized and collaboratively developable processes. Ideally, business processes can be viewed from an end-to-end scenario and then broken down into more detailed levels as needed, to which the corresponding KPIs are then linked. Based on this, we obtain the KPIs and action options that quickly and sustainably bring the company into an advantageous position and maturity.