Designing an optimal procurement operational concept

Designing an optimal procurement operational concept 

 Designing an optimal procurement operational concept  - summary slide

Background and Challenges

An Israeli IT company that has operations around the world providing customers with end-to-end software solutions hired Tefen to improve efficiency in its procurement department. The department is structured by category, with sub departments dealing with the procurement of different things such as IT, marketing and subcontractors. The categories within the department all had their own methods of completing procurement processes, but all categories had been struggling with operative tasks that were interfering with sourcing activities.

In the diagnostics phase Tefen found that there was no clear division between sourcing and operative activities, meaning highly skilled sourcing managers were spending significant time on administrative tasks instead of investing their time in improving procurement agreements and in working with suppliers. Furthermore, many of these operative tasks were confusing and tedious, consuming much more time than necessary.

Tefen also found that many sourcing managers were unaware of how they were measured and that there were no set standards to measure success.

What we did:

Tefen conducted in depth interviews with category managers and sourcing managers in order to understand the processes and determine the amount of sourcing expertise needed to complete each process.

Tefen also analyzed the time spend on each tasks by more than 30 different sourcing managers. Tefen did this by using the AHP methodology (analytical hierarchy process) which calculates the relationship between tasks and ensures that the outcome is reliable and correct. Through this analysis, Tefen was able to determine what percentage of time sourcing managers spent on operative tasks, which was then used to determine how much operative work needed to be completed within the procurement process.

Example of AHP result

Results:

Tefen designed a new operation concept in which sourcing managers would just do sourcing and assistant buyers and an operative center would complete operative tasks. Because the assistant buyers and operative center were focused on specific tasks, they are able to complete them more efficiently than the sourcing managers could, decreasing the amount of time spent on these tasks. This also freed up significant time for sourcing managers to focus on improving their sourcing duties.

Organizational sturcture

Results of the project include:

  • Cost reduction through a decrease of 3 full time employees (FTEs) and decrease in cost of 4 FTEs that would be shifted to an operative center.
  • Processes mapping of all tasks in the procurement department to reduce confusion about workflows,
  • Set and standardized KPIs for the different employees
  • A detailed implementation plan for the client to realize these benefits.