In today’s complicated business world, the role of procurement is an essential mechanism in helping businesses identify efficiencies and streamline their internal processes. A successful procurement department can help manage a company’s spending, support operations, and protect the company from risk. As organic growth continues, and mergers and acquisitions are realized, all businesses may benefit from implementing a centralized procurement department to promote organizational effectiveness.
CLEAResult delivers solutions that lower load requirements for energy utilities reduces energy bills for end users and minimizes environmental burdens on communities. We implement energy management programs on behalf of utilities across North America, so our staff, programs, offices, and operations are spread across the continent as well. Developing a centralized procurement department was critical to our business function, and also to the successful delivery of materials and services for our client programs. Below are four steps we’ve found helpful in creating a centralized procurement department.
1. ESTABLISH THE BUSINESS NEED
Do an assessment of all your vendors and suppliers – is there duplication of services, is there an opportunity to leverage buying power? If your company is experiencing rapid growth or has just experienced a merger, it is likely there is some overlap or inefficiencies to be resolved. All companies seek to reduce costs, regulate sales, and identify more cost-effective and quality sources of supply; creating a consolidated procurement department enables a company to better manage all these goals.
2. GET CROSS-ORGANIZATIONAL INPUT AND BUY-IN
Procurement affects teams across the business, so it makes sense to partner with those teams to understand needs and proactively address existing challenges before developing a new procurement department and policies. Our client programs, for example, have requirements around supplier diversity; this program perspective further supported our own corporate business goals around increasing supplier diversity. Our field teams expressed pains in purchasing processes; this input resulted in our putting more purchasing cards in the field and increasing mobile payment tools.
CLEAResult delivers solutions that lower load requirements for energy utilities reduces energy bills for end users and minimizes environmental burdens on communities
We knew we would need company buy-in to make the new procurement team and policies successful, and by including teams in the development process, we knew from the start that we would have their buy-in as well.
3. CREATE A PLAN AND SET MEASURABLE YEAR-ONE GOALS
Realistic and incremental goals are important when launching change or any new initiative. We set measurable goals for the first year and ended up more than doubling the results of those goals.
We focused on supplier diversity, fleet vehicles, and travel first. For supplier diversity, we established diversity goals, where we did not previously have goals in place. We also increased the scope of supplier diversity by adding diverse entities as key supplier relationships. And we established membership with major business and industry diversity organization, including National Minority Supplier Development Council (NMSDC), Women Business Enterprise National Council (WBENC), National Gay Lesbian Chamber of Commerce (NGLCC), Edison Electric Institute (EEI), American Association of Blacks in Energy (AABE), and Western Regional Minority Supplier Development Council (WRMSDC). For fleet vehicles, we established vehicle equipment standards and changed our lease vendors for vehicles, fuel, and maintenance; we also updated licensing and branding for our leased vehicles. For travel, we renegotiated agreements for air, hotel, and rental cars; and we’re in the process of revising travel policies.
Some changes will take longer than others. For reference, we have been rationalizing our real estate portfolio for the past two years. Expected changes will be efficiencies like locating some teams to more flexible, temporary workspaces and meeting facilities, versus traditional offices for short term lease agreements.
4. CELEBRATE MILESTONES AND WINS!
Launching a new department or centralizing disparate teams is a big undertaking, so it is important to recognize and celebrate wins. This acknowledgment recognizes the team’s work but also validates the new endeavor and policies for the whole company. In 2018, after two years of steady work to increase our diverse supplier network, CLEAResult accepted the Edison Electric Institute Prime Supplier of the Year award, for outstanding efforts to advance diverse businesses. It was a big win for us, and we’ll continue to increase our goals year over year.
Taking a strategic approach to launch a centralized procurement department can be a major value-add to a company’s bottom line and can have the added benefit of making program delivery more cost-effective as well. Collaboration, an action plan, and measurable goals may even lead to an industry award that your new centralized procurement team can celebrate.