Putting structure into procurement processes
Procurement teams are often expected to reduce costs and improve supplier value. But to do this effectively, the right procurement processes need to be in place before spend happens.
Areas such as consultancy services, IT equipment and office supplies are often purchased outside of formal systems and processes. This makes it difficult to gain a clear view of where money is being spent, control costs or enforce approvals. By the time an invoice arrives, it’s too late.
At the same time, this creates a significant opportunity. By introducing structure before purchases are made, businesses can gain control of spend, improve reporting and identify where meaningful cost savings can be achieved.
In this article, Richard Lindqvist, Business Manager at Columbus Sweden, explains why procurement remains a challenge for many organisations, how to bring indirect spend under control, and why change management is often the biggest barrier to success.
Challenges of unstructured procurement spend
Most businesses already have structured processes for purchasing goods and materials needed for production. This typically sits within a core business system such as ERP and follows a defined supply chain process. However, a significant portion of spend sits outside of these processes.
“Across an organisation, employees are constantly buying from suppliers,” explains Richard. “In many businesses, these purchases are unstructured. Someone identifies a need, contacts a supplier and places an order, and the invoice only appears afterwards. At that point, it’s too late to influence the decision and businesses lose the visibility needed to manage spend effectively.”
This makes it difficult for organisations to answer basic but critical questions such as:
- Which spend categories are the largest?
- Which suppliers should be prioritised for renegotiation?
- Are employees buying from preferred suppliers?
- Where are there opportunities to consolidate spend or reduce unnecessary costs?
“No one inside the organisation can answer these questions properly because they don’t have the data,” says Richard. “The process is happening between people rather than in a system. A business may have significant spend, but without structure and visibility, it becomes very difficult to manage or optimise.”
How to improve procurement processes
Procurement automation, including purchase approvals, order tracking and vendor communication, can help reduce administrative effort and free up procurement teams to focus on higher-value activity. However, for many businesses, automation isn’t the main driver. The priority is reducing overall spend while maintaining the same level of service. This is particularly relevant for larger organisations, where spend is significant and harder to control at scale.
To achieve this, businesses need to introduce structure before a purchase is made, not after the invoice has already arrived. That starts with changing how employees request goods and services. “Before any employee makes a purchase, a request should be submitted through a central portal outlining what they want to buy. That request is then reviewed and approved by the business, and only once it’s approved can the purchase go ahead,” says Richard.
This shift gives businesses greater control over how money is spent. It also enables procurement teams to guide employees towards preferred suppliers and negotiated agreements that offer the best value.
A key part of procurement process improvement is making spend easier to understand. With category management, procurement teams gain a clearer view of spend by category, helping them identify patterns, prioritise activity and identify savings opportunities.
“For example, a business may buy from one supplier, but the cost is recorded in different ways across the organisation. It might sit in finance or IT in other cases. That makes it difficult to get a clear view of total spend with that supplier,” says Richard.
“We help define that structure so procurement teams have clear, actionable insight to work from, grouping spend into categories and understanding which suppliers sit within them.”
Once the process is structured and spend is categorised properly, businesses are in a stronger position to act on the data. With reporting, dashboards and visualisation, procurement teams can make informed decisions on supplier activity and category spend, rather than relying on assumptions or fragmented data.
“We provide pre-packaged reports specifically for procurement teams. By looking at this data, we can help them identify potential savings opportunities. I have worked with customers that had billions in spend with no clear visibility. By introducing a structured procurement process, they were able to target significant cost savings simply by bringing that spend under control,” says Richard.
AI can also play a role in improving procurement, but only once the right foundations are in place. This means the first priority for businesses is to create order. Once processes and data are structured, AI can begin to add value.
“Adopting AI in procurement isn’t as straightforward as in other processes,” explains Richard. “In accounts payable for example, AI works well from the beginning because the data and processes are structured. In procurement, that structure often doesn’t exist, and that’s exactly what we help business put in place.”
Procurement process improvements require behaviour change
While the benefits of improving procurement processes are clear, success isn’t just about process and technology. It also requires a shift in behaviour across the organisation.
Procurement changes impact employees across the business who make purchasing decisions on a daily basis. Many will be used to buying what they need, when they need it. Introducing a more controlled process can easily be seen as an unnecessary obstacle that makes their work more difficult.
“The big issue is that a business is now enforcing every employee to use a portal and submit a request before making a purchase. This is a significant change for people,” says Richard. “That’s why it’s important that the whole organisation understands why it matters for the business and the value it brings.”
Because procurement improvements affect processes, behaviour, reporting and strategy, the value of advisory support becomes clear. This can help define how the process should work, establish the right reporting framework and spend categories, and ensure the organisation understands why the change is needed.
There’s often a strong business case for this as well. Before a company can start improving its procurement processes, it may need support in raising awareness internally around the cost-saving opportunity. “Companies are often focused on increasing revenue. Opportunities to improve profitability by changing how the business spends money are not always on the agenda,” says Richard. “Having the right partner can help guide that conversation and get management aligned around the potential cost savings.”
Achieving success in procurement with the right partner
For procurement initiatives to be successful, having an experienced partner can make all the difference. As Richard highlights, these projects bring together multiple areas of expertise, including process design, communication, data structure, reporting and change management.
“You need a partner who has done this before, who has worked with similar clients and understands how businesses buy,” he says. “You shouldn’t just focus on the product vendor. You need a partner who knows your industry, buying behaviour and spending patterns.”
A structured approach is essential to long-term success. This means defining the right strategy upfront, preparing the organisation for change, implementing the process and technology, and continuously improving based on data and insights.
We use a proven delivery methodology to help you get the most from your business critical solution. We support every stage of transformation, from shaping your strategy and launching the solution to evolving it over time so you can keep getting continuous value.
“We see the most success when projects start with a clear strategy and strong focus on communication and category structure,” says Richard. “From there, the process and technology can be implemented effectively, supported by reporting that provides clear, actionable insight into where savings can be achieved.”
Take control of your procurement spend
By introducing structure before purchases happen, businesses can take control of spend that typically sits outside their core business systems. This improves reporting, strengthens decision-making and helps reduce overall costs without changing the underlying need.
However, success isn’t just about process. Because procurement changes impact employees across the organisation, managing the change effectively is critical. Teams need to understand why the change is happening, what it means for the business and how it supports better ways of working.
If you’d like to find out more about how to bring your procurement spend under control, reach out to Richard via the contact card below.
