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Procurement Target Operating Model increases S2P investment value

by | July 9, 2019

For many organisations, going live with Source-to-Pay (S2P) will be the first time they have had to manage strategic and transactional procurement systems with hundreds or thousands of users and suppliers. But overlooking the structure and organisation of your procurement function can make the difference between the success and failure of your S2P, many months or years after implementation.

A procurement Target Operating Model (TOM) is a way of connecting the strategy, processes and technology around what you hope to achieve with your desired procurement function. It can help put structure around how your procurement function will work, both transactionally and strategically, and give you a clearer understanding of what your possibilities are.

 A logical approach to procurement intelligence

Procurement Intelligence focuses on gathering together all the information needed to analyse and support decision making for your procurement function.

Your procurement strategy and objectives, as well as governance and controls, should underpin your procurement function within your wider business framework. Consider how your needs as a business will match up to your existing skill sets and identify the necessary procurement processes you need in place.

Pull together all this information into one place, almost like your procurement blueprint, so that you can start visualising and planning how you want to deliver effective procurement within your organisation. Bear in mind that there is likely to be different impacts on your procurement function and on the business as a whole. You’ll need to consider what resources will be required, the processes involved and what systems you will need to support those processes, and the underlying cost of the function itself.

You will need to think about your procurement function from two aspects, value generation and value capture.

  • Value generation is created through the strategic sourcing cycle, looking at how to gain value and increase operational performance by identifying sourcing opportunities and strategies, and then executing them with supplier selection and onboarding.
  • Value capture is about how you take advantage of discounts and savings. In procurement this needs the right processes and technology tools to help you carry out activities with value capture in mind such as processing invoices or maintaining supplier relationships

From foundations to delivery

To deliver your procurement vision you will need to evolve. You could think about this in a series of waves. Firstly, creating the foundations for your vision in becoming a world-class procurement function. Secondly is transition, building your team, creating structure and supplier spend targets and so on. And thirdly the delivery of your plan and the tracking and monitoring of it.

Your procurement Target Operating Model could be split into three main processes – strategic, centralised/specialised and transactional. Some of these activities may take place inhouse or be outsourced.

Strategic procurement focuses on high level activities such as governance, stakeholder engagement, and people and performance development. The second, centralised and scalable specialisms, is more about following best practice and creating self-service processes and covers activities such as global processing, e-procurement and spend analytics. The third, transactional, is about leveraging scale and skills for activities including invoicing, purchase order processing and managing contracts.

Why use a TOM?

A TOM helps you to create a framework for your procurement function that will be fit for purpose for the organisation and in line with your overall strategy, governance, people and resources. It will help you understand the relationships between roles, processes and technology enabling you to deliver the benefits set out in your business case.

A Procurement Target Operating Model gives you a real advantage when implementing a S2P system because it helps everyone involved to understand how a S2P solution will support your business processes.

Xoomworks can work with you to help you create your Target Operating Model framework to ensure you get the most out of your S2P implementation and usage.

Revolutionise your procurement function

Xoomworks offers vendor neutral e-procurement and supporting system specification, selection and implementation, integration and optimisation services. We’ll support your aims and ensure that they are aligned with your TOM framework and technology. Whether you need help to establish buying channels or catalogue management, we have the expertise and technology know-how to understand what works best and how to embed into your overall processes.

Find out more about the relationship between the roles, processes and systems needed to truly deliver your procurement benefits and make the most out of your S2P. Contact us now and find out how you could revolutionise your procurement.