Maturity among purchasers
Investing in and implementing a major procurement system is not something that can be rushed into. The entire business must be ready for the changes and seize the opportunity to optimise and prepare the strategy and procedures surrounding procurement.
Our experience and knowledge development in procurement shows a direct link between the maturity of a procurement department and the value it delivers to the organisation. CEO Millum SverigeMagnus Andersson
In its research for Millum, KPMG divided maturity into four different levels. They define how far the business has come in terms of establishing sound, effective procurement strategies and procedures. The results clearly show that there is a connection between a business’s maturity, and realised savings and efficiency gains. We are constantly finding that internal maturity in a business determines whether we can start talking about implementing procurement systems. Such an implementation demands a lot of a business, and the desire to cut costs and streamline procurement has to come from the very top. Without full commitment from the management, the work force is not equipped to maximise the effect and savings.
The best procurement departments perform 340 per cent better on average than those with a lower maturity level. This implies that there is great potential and possible profit in investing in the in-house procurement function.
My experience is that businesses generally advance up the maturity ladder as they move through the process. Some quickly see the need to rise up to a high or best-in-class level, while others may take many years to realise the need and see the opportunities involved.
Maturity level
Low Maturity
- No strategic anchorage or in-house procurement strategy
- Established procedures are linked to transaction-based purchases and basic control mechanisms
- Planning is a local activity, conducted in connection with the annual budget review
- No cost-cutting targets or other set goals
- No link to the management and board level
Medium Maturity
- A procurement strategy has been formulated and documented
- The procurement strategy is known outside of the procurement department to some extent
- The procurement department regularly meets with key parties and receives feedback on its performance
- Direct link to the management or board level
- Formal guidelines exist but are not seen as obligatory
High Maturity
- Key stakeholders are fully engaged in strategic development of procurement
- The procurement strategy supports a broader organisational strategy
- The strategy is focused on delivering commercial benefits and risk management
- The strategy contains both short and long-term goals and activities
- All members of the procurement group have regular contact with important stakeholders
Best in class
- The purchasing strategy is on a par with the overriding strategy and reflects its values and goals
- The strategy applies broadly and encompasses a wide range of commercial and non-commercial goals
- Shared KPIs and goals have been agreed and approved with internal stakeholders
- Leading employees are actively involved in procurement, so as to promote supplier dialogue and development activities
