How can a purchasing organization be transformed?

Let's consider what trends are currently impacting the procurement organization:

• B2B is becoming B2C: End users expect an environment that resembles their home environment, with a focus on functionality, easy-to-use tools and clear workflows.
• The digital transformation of procurement: there is a market of tools that is almost impossible to keep track of. Observers estimate that there are more than 1,000 procure and supply techs, with established and new players.
• The world of AI is exploding: Machine learning is changing data analytics and purchasing controlling from the ground up and improving strategic purchasing decisions.
• New purchasing topics: Pay-per-use models are replacing the purchase of capital goods.
• Sustainability: ESG reporting becomes mandatory.
• Supply security: The supply chain problems and energy crisis are putting the focus back on supply security.

Purchasing must respond to this and change. But how?"
Here are the six most important measures in my experience:

1. Accept the changed rules of the game.

The current geopolitical challenges - think of the tensions in the Indo-Pacific region, for example - require a new mindset. I mean a mindset that combines flexibility, resilience and strategic foresight, while at the same time moving away from the paradigms of recent decades such as just-in-time or annual planning.

The focus in all of this should be on "decoupling", the diversification of supply chains:

• Communicate transparently where you stand, what uncertainties exist and which decisions you need to revise in light of external factors.
• Know your limits, act confidently and decisively in turbulent times and know how to replenish your and your team's energy reserves.
• Consider which suppliers are real partners.

2. make a conscious decision for your digitalization strategy.

One or more ERP systems (usually SAP) usually form the backbone of companies. But these are of little help when it comes to strategic purchasing, supplier management, purchasing controlling, contract management, risk management and sustainability. Instead, a thought-out digitalization strategy is required to overcome these challenges. You basically have four options here:

1. One-provider strategy: all tools come from the backend provider.
2. Platform strategy: the use of a purchasing platform that covers as many strategic issues as possible.
3. Expert strategy: a selection of best-of-breed systems.
4. Speedboat strategy: you work with specialized providers and start-ups.

In many cases, IT makes the system decisions alone. But shouldn't procurement be in the driver's seat for its tools and define the digitalization strategy together with IT? In view of the changed rules of the game, systems can no longer be introduced over a period of years. Accordingly, the trend is towards company-specific eco-systems that deliver benefits quickly. This is made possible by the now large number of providers - from start-ups to established SMEs - whose tools can be connected via standard interfaces according to the peer-to-peer (P2P) principle.

In my experience, it is less important to screen them all. It is better to introduce a tool quickly as soon as you have recognized it as helpful.

3. Find tools that fit your challenges and your culture.

It is less about technological solutions that match the latest hype. "Follow the flow" is simple, but not always the best solution. Because every company is different. Instead, when selecting tools, I would start from user stories, which work like personas in marketing. Such stories can map requirements better than conventional criteria lists.

In addition, user stories force providers to map specific use cases in their tools from the outset. You can then skip the more or less informative presentations that introduce the respective tools.

And once you have decided on a tool: If it has functions that go beyond your original requirements, then don't hesitate to adapt your processes accordingly.

4. Think carefully about how best to implement your systems.

... so that the introduction of new systems doesn't become a challenge in its own right, overshadowing and obscuring the actual objectives. Some major projects, such as the implementation of an S4/HANA system, are still managed in the traditional top-down manner. But many other tools can be introduced agilely:

• Use the opportunity to optimize your processes during implementation. Methods such as business process mapping and business process mining can be used to bring established processes into a new environment - but not only that. They are also an opportunity to make processes leaner and improve data quality at the same time.
• Earmark part of the budget for transition management. To design the transformation, also consider alternative forms of project management such as a team consisting of a specialist project manager and a transition manager.

5. Think carefully about which employees you will need in the future.

New tasks for procurement and its digitalization require new roles, such as data analysts and social media buyers. However, the market does not have enough specialists. So what needs to be done? The following questions highlight possible solutions:

• Do all employees need to have exactly this qualification?
• What can be automated?
• Are there suitable employees in the specialist departments or at suppliers?
• How can cooperation with universities of applied sciences be established or expanded?

In practice, the following has also proven successful:

• Tandems of business and purchasing expertise: A marketing manager acts as a business partner, the team consists of strategic buyers.
• Tandems consisting of mothers and experienced employees over 55 years of age who work part-time.

In general, workforce management should be approached holistically in terms of increasing human capital from internal and external forces. This also includes good working conditions that increase the retention rate.

6. Address the issue of sustainability company-wide, preferably in industry alliances.

ESG reporting has been mandatory since 1 January 2025. January 2025 if two of the following three criteria apply to your company:

• 250 employees and more
• a balance sheet total of at least €20 million
• more than 40 million euros in revenue

In conversations about this, I often get the impression that companies see ESG reporting primarily as a reporting task. But:

1. Is that not too short-sighted? After all, the consumer focus will change and there are already banks that are focusing entirely on sustainability and future viability.
2. And isn't this an opportunity, in conjunction with industry partners, to develop our own supply chains to be more ecological, sustainable and social - i.e. future-proof?

Many tools help to provide the necessary data. One thing is certain: such adaptations are leading to no longer making a traditional distinction between purchasing and suppliers, but instead finding new answers together in industry alliances - such as the chemical industry.

Conclusion: different challenges require different solutions

Purchasing organizations must change in order to continue producing added value in rapidly changing environments. There cannot be a single strategy that fits everywhere: The problems faced by each purchasing organization are too different. But what all challenges have in common is that they are an opportunity to improve the organization.