Procurement is critical to large businesses and government agencies and key to the success of an organization. Yet sometimes procurement is seen as a purely cost-oriented, transactional function whose budget should be managed at a minimum level. However, a strong procurement organization can contribute to an organization’s strategic goals and culture of innovation. This white paper examines how to further position procurement as a strategic value-added activity to the enterprise, including how business process management (BPM) can accelerate these efforts.

Accelerating Procurement Performance with BPM

Table of Contents

Procurement in Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Procurement as Strategic Contributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Create a culture of innovation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Increase flexibility, agility, and speed . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Enable collaboration in an extended enterprise . . . . . . . . . . . . . . . . . 4

Enhance visibility and transparency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Strengthen risk and reputation management . . . . . . . . . . . . . . . . . . . 4

Highlight efficiency and cost reduction . . . . . . . . . . . . . . . . . . . . . . . . . 5

Using BPM to Achieve the New Goals of Procurement . . . . . . . . . . . . 5

What is BPM? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Introducing OpenText™ Procurement Performance Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

About OpenText . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

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ACCELERATING PROCUREMENT PERFORMANCE WITH BPM

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Procurement in Transition

Procurement is critical to large businesses and government agencies and key to the success of an organization. Yet sometimes procurement is seen as overhead, a department whose budget should be managed at an adequate but minimum level. However, this perception is slowly changing as organizations realize that procurement is more than an administrative function; that its true value lies in its ability to contribute to the organization’s strategic goals and culture of innovation.

According to research by management consulting firm A.T. Kearney1, high-performing procurement teams also have a positive financial impact on the overall organization. The top 25 percent of procurement organizations generate $1.25 million annually in financial benefits per procurement employee and deliver solid financial benefits exceeding 7.5 times their costs and investment.

By contrast, procurement organizations in the bottom 25 percent of effectiveness are considered “dilutive;” their financial benefits insufficient to cover the cost of their activities. So clearly it is in the best interest of the overall organization that procurement lives up to its potential. And procurement can meet that goal when it’s viewed by the rest of the organization as a source of ideas, creativity, and innovation, rather than “the group that focuses [solely] on sourcing raw materials, goods, and services.”2

Just as important, the chief procurement officer (CPO) needs to communicate its value to the chief financial officer (CFO) and other members of the C-suite. That means the CPO needs to harness the data that tells the story. The CPO must translate departments’ activities, resources, and results into the kind of metrics that matter to executive management. The CPO must demonstrate hard financial results, calculate the costs to deliver those results, and frame the discussion in terms of return on investment.

This white paper examines the areas CPOs may focus on to further position procurement as a strategic partner to the enterprise, including how the discipline and solutions of business process management (BPM) can accelerate these efforts.

Procurement as Strategic Contributor

Below we discuss six ways the procurement function can elevate its stature and value within the organization:

Create a culture of innovation

Innovation can take many forms within procurement. Perhaps most obvious is its role in research and development (R&D), bringing its experience and insight to build vs. buy decisions. This means being included earlier in the buying process, so that procurement can guide or have an impact on purchasing decisions. Procurement managers who work closely with the innovation R&D team and marketing teams are apprised of the business and go-to-market strategies, allowing them to translate these goals to something that is meaningful to suppliers.

Procurement can also guide the larger organization in areas such as sustainability, corporate social responsibility, and risk management. Data and predictive analytics are keys to innovation, and procurement can leverage big and content data regarding supplier performance, market trends, and risk analysis.

1 Building a Bolder Legacy: The Procurement Mission is Underway” © 2015 A.T. Kearney, produced in collaboration with the Chartered Institute of Procurement & Supply (CIPS) and the Institute of Supply Management (ISM).2 “Charting the course: Why procurement must transform itself by 2020” © 2013 Deloitte Development LLC.

According to research by management consulting firm A.T. Kearney, high-performing procurement teams also have a positive financial impact on the overall organization.

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Increase flexibility, agility, and speed

The pace of change in business requires greater flexibility, agility, and speed in procurement like never before. External forces for example – whether man made or natural – can quickly disrupt a supply chain, and in these situations procurement needs to assist buyers in shifting to other suppliers. Internal changes, such as an acquisition, merger, or reorganization, can also affect purchasing decisions by bringing new vendors – and risks- into the ecosystem.

Further, because procurement is a shared service, it must accommodate different purchasing processes and different needs of a range of buyers. The group that procures media services, for example, may have a very different process than the group that purchases office supplies, and any standardization must account for these variations in process.

Enable collaboration in an extended enterprise

Modern procurement in a large company may be a global organization, with personnel around the world managing procurement in their local regions. The role of collaboration in making the procurement function increasingly efficient, innovative and influential is no longer a nice-to-have in today’s fast-paced, global ecosystem. In an environment of “more for less” there is a need to drive down duplication, disorganization and incompetence.

Strong coordination and collaboration across the enterprise is required: within the procurement team, with internal stakeholders, and the “extended” enterprise, which includes partners, suppliers, and customers.

Enhance visibility and transparency

Procurement isn’t exempt from the dreaded but pervasive “death by spreadsheet” practice, and the problems with such manual processes are obvious: they’re cumbersome, high-maintenance and because of that, the data can be unreliable. The ability for organizations to gain quick insight into performance of the department as well as individual team members can be a challenge. CPOs need a way to distill insight from multiple sources of data so they can get to a single source of truth on a given topic, what Deloitte calls “turning ‘big data’ into ‘smart data.’”3

Stakeholders continue to expect transparency. Social media has created a world in which news of a misstep can spread quickly. Organizations are increasingly held accountable by shareholders, the media, government agencies, and the general public. In an increasingly ethics-aware climate, CPOs must also demonstrate that business is conducted with integrity, fairness, and openness, including their sourcing activities.

Strengthen risk and reputation management

Third-party risk management is the fastest growing governance, risk and compliance concern of surveyed organizations according to the Compliance Week 2015 Compliance Trends Report. This trend illustrates a recognition that supplier risk can have a significant impact on an organization’s ability to meet its production timelines, quality objectives, and cost targets. Further, as one’s supply chain is an extension of an organization, a blunder by a vendor can affect an organization’s reputation.

Deloitte suggests, “Supplier behavior, infractions and violations are procurement’s responsibility, especially globally, where local practices and regulations might be different than what is expected in other markets.”4

3 “Charting the course: Why procurement must transform itself by 2020,” © 2013 Deloitte Development LLC.4 Ibid, Deloitte.

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Highlight efficiency and cost reduction

Procurement’s expertise is finding ways to save money through contract negotiation with suppliers. Although this expertise remains important, it’s the minimum expected competency. To show value today, procurement must go beyond basic expectations and ensure “that contracted savings actually make their way to the bottom line.”5 In other words, procurement must demonstrate how purchasing decisions relate to “buy side” factors, such as inventory levels, cash flow requirements, suppliers’ capabilities and service level agreements, as well as sales projections, market demand, currency trends, and other “sell side” data.

Tying purchasing decisions to other key metrics that are important to the organization requires a more sophisticated analysis of data, an ability to synthesize information from various systems, such as ERP and CRM, and a standard method of calculating and communicating performance. Presenting data and KPIs in a customizable dashboard also helps CPOs make more informed decisions and report results up the chain of command. A CPO dashboard can present a wealth of information and detailed analysis at a glance, including spending by category, spending against targets and procurement staff performance.

Using BPM to Achieve the New Goals of ProcurementWhat is BPM?

Business process management, or BPM, is “a discipline involving any combination of modeling, automation, execution, control, measurement and optimization of business activity flows, in support of enterprise goals, spanning systems, employees, customers and partners within and beyond the enterprise boundaries.”6 In plain language: people interact with each other and with software systems every day to achieve business goals. Often these interactions are unstructured, ad hoc, and inefficient. BPM brings structure to common interactions by establishing processes that can then be optimized for efficiency while allowing variation and flexibility.

OpenText™ Process Suite is a complete business process management (BPM) system, which enables organizations to become more agile, more productive, and more competitive. At the core, is the Process Suite Platform (Process Platform), which delivers the power and flexibility to digitize, automate and integrate processes across functions, systems, machines and the cloud. Process Suite automates and integrates processes across functions, systems, machines, and clouds. It enables information exchange with external systems and applications and includes collaboration capabilities, as well as OpenText™

Process Intelligence for advanced reporting and analytics.

OpenText also offers a set of applications built on Process Suite to speed deployment for specific business solutions and add-on products that extend the value of the platform. One such application is OpenText Procurement Performance Management.

5 “5 disruptive forces that will keep CPOs awake at night in 2015.” See: https://www.linkedin.com/pulse/5-disruptive-forces-keep-cpos-awake-night-2015-tania-seary.6 See http://bpm.com/what-is-bpm

BPM brings structure to common interactions by establishing processes that can then be optimized for efficiency while allowing variation and flexibility.

ACCELERATING PROCUREMENT PERFORMANCE WITH BPM

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www.opentext.com/contactCopyright © 2016 Open Text SA or Open Text ULC (in Canada). All rights reserved. Trademarks owned by Open Text SA or Open Text ULC (in Canada). (11/2016)06092EN

Introducing OpenText™ Procurement Performance Management

OpenText Procurement Performance Management (PPM) application was designed by OpenText partner and global management consulting firm A.T. Kearney. PPM provides essential tools and capabilities CPOs need to manage, track, measure and drive continuous improvement in a procurement operation. It offers visibility into an organization’s project pipeline, facilitates clarity in roles between procurement and key stakeholders, and enables financial validation of benefits.

OpenText PPM manages and measures the value generated by procurement in quantifiable terms by tracking variables and validating results throughout the process. It integrates critical activities such as planning and project pipeline management, financial benefits tracking, and talent management. With OpenText PPM, procurement leaders gain deeper insights into their performance and what needs to be accomplished, helping them deliver better results, more efficiently. The above diagram highlights the four areas of procurement addressed by OpenText PPM.

About OpenText

OpenText enables the digital world, creating a better way for organizations to work with information, on premises or in the cloud. For more information about OpenText (NASDAQ: OTEX, TSX: OTC) visit opentext.com.

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Planning and PipelineManagement

Project Execution and Workspace

Finance Validation andBenefits Tracking

Resource Optimizationand Talent Management

Procurement Performance Management

Planning and Pipeline Management

• Helps manage the pipeline of projects planned

• Forecasts savings

• Drives stakeholder engagement and aligns projects with goals and objectives

Project Executionand Workspace

• Shows real-time visibility of project status and accountability

• Provides a repository for activities, communications and documents via project space

Finance Validation and Benefits Tracking

• Tracks key elements of projects end-to-end

• Facilitates validation of results with finance and business units

• Pushes data to metricsand dashboards

Resource Optimization and Talent Management

• Helps manage individual and team performance with scorecards

• Monitors validated financial benefits delivered by Supply Management and drills-down into areas of improvement

FIGURE 1

The four areas of procurement addressed by OpenText PPM