What Is a Procurement Center of Excellence and What’s Its Value?
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More and more procurement leaders are creating centers of excellence in order to drive much improved business outcomes through operational excellence. Here, we evaluate what a typical Procurement Center of Excellence looks like, how they run and the outcomes that can be achieved.
What Is a Procurement Center of Excellence?
Gartner defines as a Procurement Center of Excellence (COE) as, “a permanent, primarily full-time team of experts focused on attaining and sustaining world-class performance and value”.
Spend Matters zones in on the outcomes of a Procurement COE in its definition, describing it as, “an internal entity that performs internally facing knowledge-based services on a one-to-many basis to Procurement (and to broader stakeholders) in order to drive scale, repeatability, and best practice.”
What’s a Procurement COE for?
If we consider the Spend Matters’ definition based on outcomes, the Procurement COE should provide knowledge services on best practices in areas such as cost cutting, supply chain optimization, building superior supplier relationships, driving engagement with the function, and developing or finding the skills and expertise required for running a digitally transformed procurement team.
Centers of Excellence will typically play quite a holistic role within the organization, taking on responsibilities such as advising on the implementation and use of new technology, undertaking research, and providing training to employees.
Why Are Procurement COEs gaining popularity?
The reason why many organizations have either established (or are looking to establish) Centers of Procurement Excellence is because they aim to promote greater collaboration and also promote the use of best practices that will ultimately produce better results.
Advantages of a Procurement COE
There are a number of areas in which better results can be achieved, including:
- Building a team that has common procurement goals
- Encouraging shared learning and sharing of information from a central source
- Ensuring faster introduction of new procurement methodologies
- Supporting creation of flexible supply chain processes
- Overseeing training and skill assessments
- Providing better cross-functional insights
Building a team that has common procurement goals
One of the biggest challenges facing Procurement in light of the ongoing importance of ESG or CSR goals at a corporate level is ensuring that the function can align its own goals with those of the wider business.
A Procurement COE is a means of establishing a central management team that can set these goals and ensure that they are woven into the DNA of the entire function.
Encouraging shared learning and sharing of information from a central source
Procurement is frequently regionally decentralized and stakeholders come from across the business, including risk, compliance, sustainability and others. This decentralization can lead to a fragmentation of knowledge.
On the other hand, a Procurement COE can oversee the centralization and redistribution of key knowledge that might otherwise remain siloed in business units or functions. In this way, the broader organization can benefit from pockets of knowledge throughout the business.
Ensuring faster introduction of new procurement methodologies and technologies
Equally, this centralization of knowledge helps accelerate the introduction of new procurement methodologies, which can be in terms of processes, or frequently processes underpinned by technology.
As shared learning and shared knowledge helps standardize knowledge and procedures, it can also drive forward much faster adoption of technologies to support these goals, as well as provide the foundations from which to drive necessary change management.
Overseeing training and skill assessments
Complementing the above, a Procurement COE establishes, as Gartner puts it, a full-time team of experts focused on attaining and sustaining world-class performance.
This means they are in the best position to recognize skills gaps, to find talent to fill those gaps, and to provide the training necessary to deliver against the goals and targets.
Supporting creation of flexible supply chain processes
One of the advantages of putting a Supply Chain Center of Excellence or a Procurement Center of Excellence in place is that it can help to support the creation of flexible supply chain processes that can be tailored at a local level, where requirements may differ from one region to the next (e.g. regarding regulations and laws).
From a procurement perspective, the Supply Chain or Procurement COE is responsible for managing the sourcing of goods and services at a global level.
Providing better cross-functional insights
The Centre of Procurement Excellence will draw on the expertise of cross-functional teams that can provide insights into areas such as compliance, risk and services and centralize that information.
Once centralized, it can become the point of contact for all teams across the business to source the information they require.
Typically, the reason why many organizations have either established (or are looking to establish) Centers of Procurement Excellence is because they aim to promote greater collaboration.
How To Successfully Build a Procurement COE
When it comes to planning out and building a Procurement Center of Excellence, there are steps you should take in the project’s early stages to improve your chances of success.
Have clear goals and objectives
You need to have a clear idea of what your goals are and how the sourcing center of excellence is intended to add value to the wider organization.
Have mandate and ability to scale
You also need to take into account the ability to scale-up its operations over time, how this can be achieved (e.g. through the use of tools such as automation) and how you plan to report on its results to key stakeholders.
Achieve alignment with the overall objectives of the organization
As William Atkinson states in this piece for SupplyChain247, “Procurement excellence means aligning procurement strategies and programs with the overall objectives of the organization, helping everyone to align with those objectives, and managing the risks that are inherent in the procurement processes.”
Given the Center of Excellence’s role and position within an organization, it really is essential that straightforward communication and collaboration between the central management team and other areas of the business is always taken into account when establishing a Procurement COE.
Article updated September 2024
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