Posted: 06 Jan. 2023 5 min. read

How can procurement strategy fully leverage the Center Office Model?

Optimize underlying spend and maximize business outcomes

The Center Office global business services (GBS) model enables organizational resilience through cross-functional teams delivering end-to-end processes for different businesses—consistently, flexibly, and at scale. Procurement, a key enabler of the center office delivery model, often fails to fully leverage efficiencies GBS models are designed for. Based on our experience, there are three key challenges that, when remediated, can deliver outsized benefits:

  1. Ineffective category management feedback loops: Procurement category managers typically focus on strategy. However, many are not following through to execution (due to a multitude of reasons—lack of familiarity with operations, improper objective setting, “not-my-job-ism,” etc.). This is especially problematic when procurement execution is “walled off” in a separate organization. Folks in this role are often not supported with tools, mechanisms, or templates to successfully drive and, almost as important, demonstrate value to stakeholders. For example, category cards (instructions to transactional procurement teams for common purchasing decisions) may not even exist, have not had sufficient maintenance, or are entirely insufficient to drive outcomes. When sufficiently empowered, including through 360-degree feedback loops, category managers can own these tools, leverage them to optimize underlying spend and maximize business outcomes, and demonstrate value to the organization.

    Case in point:
    A life sciences company implemented a leading-edge procurement system for indirect spend, including “guided buying” templates (category instructions that guide users on required fields based on the type of purchase). However, key staff left the company during the implementation, resulting in lack of ownership for these templates.

    Lessons learned:
    Guided buying templates must be tied to category cards and, subsequently, the buying instructions for raising orders. They require consistent ownership and maintenance. Finally, all this hinges on a constructive feedback loop between business teams and procurement owners to manage and optimize the process over time.
  2. GBS–transactional focus: Traditionally, GBS organizations focused on transactional activity (e.g., raising purchase orders, matching, and paying invoices) but have not optimized or expanded into advisory/strategy activities (e.g., setting up bid events, contract administration and execution, data analytics). Not only does this represent a potential opportunity for efficiency, but it can also bring together end-to-end ownership, turbocharging the feedback loop and driving a highly effective procurement capability. Organizations that proceed down this route begin by assessing fundamental competitive advantage, areas of their highest value-add (e.g., research and development, agency and marketing partners, contract manufacturing), and opportunities to improve capability maturity. A center office approach will optimize on end-to-end ownership for those areas that can be managed centrally (above site, above brand) to deliver tangible, clear outcomes for downstream customers. For example, an organization can expand beyond procure to pay for digital content creation, moving processes related to vendor identification, tactical sourcing, contract administration, data analytics, and risk and compliance assessments to a one-stop-shop model for brand managers to quickly access the talent they need while demonstrating value for spend from a digital buying hub.
  3. Limited procurement automation: Within procurement there is an opportunity to better operationalize strategy, improve transparency, and deliver more efficiently by automating, maintaining, and digitizing core elements of the procurement process. This can include everything from raising a purchase request to executing contracts and matching invoices to payments. For example, the purchase mix can be automatically calculated using forecast, inventory, contract volumes, and market pricing for commodity materials. GBS leaders, often responsible for broader process improvement and business transformation, are well placed to lead initiatives that deploy digital solutions to drive outcomes, reduce transactional workload, and allow procurement professionals to focus on strategic design of category-level programs.

Authors

Joe Montrosse
Managing Director
Deloitte Consulting LLP
jomontrosse@deloitte.com

Brent Griffith
Managing Director
Deloitte Consulting LLP
bgriffith@deloitte.com

 

 

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