By Paulo Moretti
The life of a purchasing executive is filled with doubt. I know because over the years, corporate purchasing managers have bombarded me with questions.
From my experience, these questions all have one thing in common: Purchasing Maturity Level. The idea comes from research funded by the U.S. Dept. of Defense to develop the Capability Maturity Model (CMM), where the term "maturity" relates to the degree of formality and optimization of processes: from ad hoc practices to formally defined steps to managed result metrics to active optimization of the processes.
From consultants across the industry, including my friends at AT Kearney, Efficio Consulting, Vantage Partners, and Tensing Consulting, a methodology has developed over the years to diagnose areas of opportunity to improve efficiency and effectiveness in purchasing function.
Each of these groups has developed questionnaires in their areas of expertise to map the strengths and weaknesses of purchasing dimensions like Tools, Internal Clients, Suppliers, Organization, Staff, Policy, Process, and Metrics.
These questionnaires, or tools, help the consultant detect which dimensions might be improved. Based on this diagnosis, the consultant might propose change management, a new process, new tools, or staff training, so that the company can understand where it is now, where it will be, and how it can get there.
My objective with this article is to demonstrate a tool for high-level purchasing executives to create an organizational self-assessment, so they can more fully understand areas for improvement, whether they are able to change by themselves, or whether they need to work with consultants on the areas for improvement. Each consultant will perform their own analysis with more sophisticated methodologies; however, this basic tool here can help executives begin thinking about potential changes for improvement in advance.
Purchasing Maturity Model
The model consists of a spreadsheet with eight dimensions to consider for purchasing maturity: Tools, Clients, Suppliers, Organization, Staff, Policy, Process, and Metrics. Each Dimension has several elements to be scored. For each element, users can select via the drop-down button the score that most closely reflects the purchasing function: 0, 1, 2, or 3 (with 3 rated as Very Mature). The score for each element has a description to guide user assessment. After scoring all 55 elements, the Result tab will show the maturity level in each dimension and the overall result for the Purchasing function.
This model divides the purchasing function into three levels with these descriptions:
Starting/Performing: Purchasing is not a core competency. It is buried deep in the organizational hierarchy. Clients and Suppliers avoid interaction. Staff actively disengaged.
Enabling/Optimizing: Purchasing is seen as a "value-added" function. There is some executive support and investment. Clients and Suppliers are satisfied for the most part. Employees are engaged but view this as a "job." There are some spot best practices.
Best in Class/World Class: Purchasing is strategic core competency. The organization is proficient at expected business practices. There is a high degree of Client and Supplier satisfaction. The organization is staffed with highly qualified professionals. There is a high degree of automation. It is metrics driven. It is an efficient and effective organization.
The results of each analysis are presented in graph form for the eight dimensions, as well as the maturity level for each dimension, in a “maturity meter” with the overall classification, as shown below.
Please click on image to enlarge for viewing.
From the above example, the purchasing executive would have a clear view that the first priorities for improvement are Tools and Internal Clients, and then the second priority is for Suppliers, Organization, and Staff. Of course, some changes in assessment may affect different dimensions, but consultants would know the best approach to most effectively implement changes.
Click HERE to download the tool. After applying the tool, let me know if you have any questions.
Click HERE to download a PDF of this article, Measuring Purchasing Maturity.
Paulo Moretti is Principal at PM2Consult.com, a boutique consulting company focused on excellence in the purchasing function for manufacturing industries and market analysis of Chemicals & Plastics industries.
Prior to becoming Principal, he was Senior Consultant at Vantage Partners, and worked 35 years at The Dow Chemical Company, where he developed experience in such diverse areas as Manufacturing, R&D, Sales, Marketing, Finance, Strategic Planning, e-Business, and Purchasing.
A native of Brazil now based in the U.S., Moretti holds a Bachelor’s degree in Chemistry and Chemical Engineering, with Master’s degrees in Industrial Management and in Business and executive course certifications from Kellogg, Wharton, and MIT Sloan.
As managing supply chain risk continues to be on the minds of CEOs in 2017, procurement leaders may want to ensure their teams have a good understanding of the legal aspects of their relationships with suppliers and good rapport with the company’s at… Read More
Concerned about data protection? How can IT procurement ensure data security and reduce cyber risk for your organisation? Read More
Many organizations have implemented strategic procurement which coupled with the recent volatility of markets requires procurement to evolve the function. Part of this is increasing the strategy and analysis to a wider scope of the supply chain to pr… Read More
Staples Advantage is the one supplier that offers all the business solutions you need, all with the expertise of a specialty vendor. Read More
It started in 1972 with an idea, a new concept in distribution. Today, Digi-Key Corporation is one of the fastest-growing electronic component distributors in the World. The stimulus for this growth is Digi-Key's customer-centered business philosophy… Read More
Procurement and supply management leaders have a seat at the table, and management’s expectations are high. But what do CEOs really want, and is purchasing delivering on these expectations? This webcast looks at how procurement and supply management … Read More
At world-class companies, purchasing’s influence touches just about every area of spending. But, how exactly do procurement teams get to the point where other departments approach them for help with sourcing such indirect categories as human resource… Read More