Operational efficiency and digital transformation – key priorities for procurement leaders in 2022

On 25 November, the online conference titled “Transformation of procurement function. Ukrainian context” was held. The conference was dedicated to practical cases of transformational changes in the most successful Ukrainian and multinational companies, the related challenges that may arise, and aspects that will help the procurement specialists in the future.

The event was organized by Kyiv School of Economics in partnership with Deloitte Ukraine and SAP Ukraine under the facilitation of KSE Center of Excellence in Procurement.

Nazar Farmaha, Director of Consulting at Deloitte Ukraine, presented the procurement sector outlook for 2022. In particular, the main development trends of procurement function, both at the global and local levels, include operational efficiency management, cost reduction, digital transformation, automation, and risk management.

He noted that the high-quality and timely insights is a must-have tool to manage the company's operational efficiency and reduce costs. “Insights will serve as a foundation for the development of categorical strategies and provide a systematic approach to cost and operational efficiency management,” said Nazar Farmaha.

“By using data, and not just emotions or situational context, you will be able to set a clear direction and take the necessary corrective actions. Moreover, you will be able to see the impact on production, achievement of set targets, and lost sales,” added Nazar Farmaha.

He also stressed on the importance of building strategic partnerships with key suppliers that will allow companies to plan their business cycles more clearly. “This will ensure effective risk management and security of supply,” said Nazar Farmaha.

Among the speakers of the first panel discussion dedicated to the needs and trends of the procurement function transformation were Olga Borodina, CPO at Naftogaz, and Taras Nikolaienko, Deputy Commercial Director at Fozzy Group.

According to Olga Borodina, Naftogaz faces a number of challenging tasks that form the basis for the procurement function transformation: “We will try to reduce the procurement cycle for Naftogaz. Currently, some purchases take 6-9 months from an offer to contract signing. It is very important for us to reduce this timeline as well as the number of unsuccessful tenders. Then, we will move on to increasing the number of categorical strategies and enhancing professionalism. After this, we will focus on automation.”

Taras Nikolaienko also stressed on the importance of maintaining the operational efficiency when transforming the procurement function. “During the transformation, it is important to maintain operational efficiency of the entire network and mobilize resources to increase categorical strategies. There are many components that need to be integrated to increase efficiency,” he said.

Speakers of the second panel discussion – Oleksandr Bohorodov, CFO at McDonald's Ukraine, and Dmytro Ptashnyk, CPO at MHP – explored the successful cases of transformational changes.

Dmytro Ptashnyk named the creation of supply centers for different lines of business as one of the most successful transformation cases in the last two years. As a result, the operational efficiency was improved. The speed of procurement process has doubled and the volume of processing work has decreased by three times. How was it achieved? Each center supports a specific line of business and there are no overlapping functions. We removed all supply departments from under the functional administrative management of enterprise directors, thus relieving them from non-core activities. We also transferred a large volume of purchases to a scheduled basis to ensure that the delivery takes place in the shortest possible time,” he said.

According to Oleksandr Bohorodov, supply localization has become one of the examples of successful transformation that has helped to overcome challenges. “Global supply chains are rather ‘disconnected’. Regionalization and localization of supply has become an important issue for us. Every year, we expand our efforts to engage certain Ukrainian companies to become McDonald’s suppliers. These companies are modernizing their production processes and facilities to meet our high standards and, as a result, are becoming competitive in the world market. This means not only the benefits for business, but also the development of the country’s economy as a whole,” he said.

At the end of the event, Andriy Polyhaiev, SAP Digital Procurement Management Expert, SAP Eastern Europe, answered the question of whether the information systems are a risk or an opportunity: “Payback rates for IT projects in procurement sector are usually very high and the payback period is about a year. The effect is formed by a range of improvements that can be measured mostly by IT tools.

Watch the video to learn more.