Procurement Reframed™: The Cirtuo 15 guiding principles and rules of strategic procurement

What is Procurement Reframed?

Procurement Reframed™ are guidelines developed by Cirtuo through decades of experience in the digital transformation of procurement. The Cirtuo 15 guiding principles and rules of strategic procurement were identified through conducting +100,000 hours of research and development workshops. The principles were applied in developing Cirtuo Guided Strategy Creation™ procurement software. Cirtuo’s solutions are relied on today by Fortune 500 companies and SMEs to transform their procurement capabilities. The guides have helped Cirtuo’s clients to accelerate the development, validation, and execution of category and supplier strategies. The Procurement Reframed philosophy has roots in our history as expert management consultants in the procurement industry. As such, the knowledge, passion, and expertise were applied in developing Cirtuo category management software –  delivering a solution that was a pioneer in the automation of category strategy creation.

What are the benefits of Cirtuo Guided Strategy Creation™?

Over the past 15 years, the timing was not suitable for significant procurement development. From 2010 to 2020, the world experienced its most extended period of economic growth. Cost reductions and supporting growth by all means necessary was a key focus for organizations with a procurement function during this period. Procurement was reduced to sourcing activities and RFx / negotiations to achieve cost reduction targets. The strategic element of procurement was considered “nice to have” but not essential, and its importance into the broader organization was not fully realized. Procurement strengthened the image of being purely tactical. COVID-19 caused a massive shift in supply chain balance, and now geopolitical conflicts require procurement to act as a firefighter for organizations in survival mode. As a result, the need to ensure business continuity is considered a top priority in times of immense disruptions, and cost reductions have become less critical.

The procurement evolution – that seat at the table – is now feasible and realized. Today, the scarcity of materials required to grow economies and maintain business viability – has highlighted procurement’s importance within the organizational framework. There is pressure in all areas of procurement for the function to move up the value chain curve. Procurement professionals tasked with searching for scarce goods and services now require a robust dialogue with stakeholders and a correction in redefining an organization’s final offering to avoid supply chain problems. A procurement framework that excludes considering the supply side can become expensive, so stakeholders will become more open to being approached by procurement to adopt new solutions. If we do not understand how to change by ourselves, then market dynamics will change procurement for the better, or it will lose its importance within organizations. It is a prime moment for many CPOs and PLTs to step up and retain a permanent seat at the table.

Transformation | Drive value

Focus on strategic tasks: automate the rest

CIRTUO ENABLES THE STRATEGIC TRANSFORMATION OF PROCUREMENT

Procurement transformation is both – digital and strategic. We currently observe digitalization focused on operational-tactical activities – SRM, contract management, procure-to-pay, procure-to-source, etc. But these solutions are just creating infrastructure to become more strategic. Then the value is created upfront in the value chain process and is simplified by starting procurement where suppliers are already pre-selected or pre-determined by the specification, you have already lost that battle. There is nothing much to win. The Procurement Reframed concept defines 15 simple, proven rules for ensuring your organization becomes genuinely strategic. So your transformation needs to be strategic as well.

Strategic and tactical activities in focus

• Identify true business needs and wants
• Identify internal and external challenges
• Integrate market intelligence
• Develop the right category strategy
• Mobilize senior stakeholders
• Manage strategy implementation
• Track results and KPIs

Strategy and Alignment

1. ‍Rule of Alignment - Procurement strategies are aligned with business strategies to support the fulfillment of the company's objective‍
2. Rule of Equality - Category, supplier and overall procurement strategies equally focus on value, costs and risk‍
3. Rule of Insight - Procurement strategies address current and future business requirements, as well as internal and external challenges
4. Rule of Agility - Procurement strategies are continuously adapted to changes
5. Rule of Aspiration - C-Level and end customers are the genuine stakeholders

Responsibility and Relationships

1. Rule of Responsibility - Procurement professionals are accountable for strategy creation, validation, and implementation
2. Rule of Relationships - Procurement professionals are responsible for relationships with stakeholders
3. Rule of Knowledge - Procurement professionals are responsible for enriching and disseminating knowledge to peers and stakeholders gained through practical experience and education
4. Rule of Sustainability - Procurement enables all relevant sustainability
5. Rule of Ethics - Follow best ethical principles in procurement

Operating Model and Organization

1. Rule of Design - The Procurement operating model and organization are designed to support the implementation of procurement strategies at all levels
2. Rule of Automation - Automate all operational and tactical activities to the maximum possible extent
3. Rule of Relevance - KPIs need to support the realization of each individual strategy; one-size-fits-all KPIs are of secondary importance
4. Rule of Integration - Strategic, tactical and operational activities and systems need to be integrated at all levels
5. Rule of Change - Procurement transformation is an ongoing process that continuously adapts the operating model and organization to actual strategies

What are the practical implications of the Procurement Reframed concept?

The Procurement Reframed concept guides procurement professionals to develop, validate and implement strategies in Procurement. Procurement Reframed is focused on strategic activities and clearly defines what it means to be strategic in Procurement. Tactical and operational activities are the result of the strategy and business initiatives.

Running Procurement from a strategic perspective should be guided by the following:

• Procurement leadership should regularly align with top management and business unit management
• A translation of business objectives and key initiatives needs to be translated into business requirements for Procurement.
• A practical model RAQSCISuDBD guides translation
• Business requirements on Procurement need to be identified, prioritized, and de-conflicted
• A procurement strategy must be developed and validated based on top-level business requirements.
• It is not an organizational development strategy for Procurement, but it is a strategy that addresses business key objectives and pain points
• The procurement strategy needs to balance local vs. global / group needs properly.
• Procurement serves as a facilitator in resolving different or opposite organizational interests
• Category, supplier, and negotiation strategies (including risk strategies) serve to operationalize the procurement strategy.
• Category managers must approach their senior stakeholders and evaluate the business requirements for a category, strategy, or negotiation event.

Cascading business requirements need to be ensured. Top-down and bottom alignment is the key to Procurement hitting the right mark. For example: imagine an overall company’s strategy is connected to growth, new markets, and sustainability.

However, for categories and suppliers, the main goal is costs or supply assurance. In the last step, all strategies will be translated into initiatives with benefits, and implementation requires close monitoring.

The RAQSCISuDBD Model

The strategy at any level changes once challenges or business requirements vary significantly. This is called a genuine agile procurement. In addition, the RAQSCISuDBD model is explained as a practical tool to translate business requirements into the business requirements on procurement.

Initially, the RAQSCI model explains requirements on Regulatory compliance, Assurance of Supplier, Quality of the delivered final or purchased product or service, and the way suppliers provide a Service to us as a customer, Cost reductions and avoidance, as well as Innovation in a category coming from suppliers or internally.

Lately, we added Sustainability and Diversity because of its contribution to the top line through procurement in terms of Business Development.

Procurement Strategies Alignment Framework

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