Project management strategies for procurement

Organizing and driving cross-functional teams stacked with a new set of skills

William Atkinson -- Purchasing, 9/1/2005

To some purchasing executives, it seems like just yesterday when procurement tended to work in a functional silo, independent of what was going on in other parts of the company. "[Procurement in those days] tended to be a backroom function that took orders from departments and placed them with suppliers," recalls James Kiser, vice president of operations for ADR North America in Ann Arbor, Mich. But today procurement's role is much more cross-functional and involves working with various parts of the enterprise in a much more project-based strategy. Goals are established, teams are set up and results are measured and driving that kind of work presents a new set of management challenges for procurement.

Take the words of James L. Patterson, associate professor of management at Western Illinois University in Macomb, Ill. "Ten years ago, procurement managers may have been participants in projects," he points out. "Now, they are the project leaders." Perhaps never before have project-management skills been so important to procurement professionals.

Typical project-management strategies taught in business school may not fit the procurement professional. For example, procurement project teams are often composed of individuals from a number of different organizations and functions with different goals or strategies. "They may include suppliers and, in some cases, even customers," notes Patterson. The financial impact may also be much more significant, especially if the project focus is to identify new or different materials or suppliers or reduce costs by a certain percentage or dollar amount.

While many procurement projects focus on areas like new product development, some actually focus on improving the procurement function or operation itself. For example, the World Bank in Washington, D.C. uses a decentralized procurement model, in which project leaders from around the world select consultants and other service providers to work with them on their individual regional projects. The project leaders receive assistance from procurement specialists in the selection of these consultants and other service providers. In turn, the procurement specialists receive support from the World Bank's centralized policy and contracting offices in Washington.

While the decentralized model makes more sense than a centralized one for the bank, it was not without its problems. For example, project leaders and other users had to access multiple systems, manage most of their procurement tasks manually, and perform redundant data entry. The bank wanted to improve its global sourcing and supplier management system by increasing transparency, enhancing compliance efforts, and improving "institutional memory" (creating a database of information about past and current projects and procurement activity that new project teams could access).

The World Bank began a strategic project to implement business process management (BPM) tools to manage its business, including a Web-based e-procurement system.

The project evolved in five phases. In the Discovery and Assessment phase, project leaders held stakeholder interviews to identify strengths and weaknesses of the existing process and to recommend improvements. In the Strategy and Prioritization phase, the strategy was created, and the features of the new process and the budget were laid out; the High-Level Design and Low-Level Design phases involved transforming the vision into hard deliverables; Development included customization, configuration, integration, and testing of the new software system; and Deployment involved creating focus groups to determine training needs.

As team leader for the World Bank's Office Technology Team, Francine Holloway, senior contracts officer, was largely responsible for managing the implementation of the new system. During the process, she identified a number of keys to success. "The first and most important was senior management sponsorship and support," she says. "It was also important to select the right vendor and software product."

Another critical element was selecting members of the cross-functional team and getting them to work together. This, she admits, was easier said than done. "Since this was an enterprise-wide system, we needed a cross-functional team composed of stakeholders who would help with the development, design and implementation of the project," she explains. "In an organization of 10,000 people, we needed more than two or three people's input."

The challenge was that the people whose input was needed were not from Holloway's business unit. In addition, many traveled quite a bit as part of their jobs. "To overcome these challenges, we worked with whomever we could when they were available," Holloway says. "We also worked as much as possible with the people whom we knew were the most supportive of the project."

Upon the project's completion, the World Bank opted for a voluntary rollout. "They asked for volunteer departments and regions to try the new system out, so glitches could be worked out before it was rolled out worldwide," explains Jason Klemow, a partner with the JK Group, a Gaithersburg, Md.-based consulting firm the World Bank hired to assist with the BPM software project.

"To date, the system is being well-received by users," reports Holloway. "In about six months, we will move forward with mandatory implementation."

Early results look promising. For example, competition among potential suppliers is improving as a result of the ease of registering themselves online, the ease of learning about new bank projects, and the ease of submitting bids. In addition, compliance and consistency are easier for the bank to monitor as a result of the worldwide electronic system. What the users particularly like is the fact that they can easily access reports on project status, performance and compliance.

And a potential benefit: "Since all of the manual tasks have been automated, the bank will be able to track the length of time each task takes, then create benchmarks," states Klemow. "They can then look for ways to shorten the time for each task." He notes that the bank has not begun this yet, but it may be something they do in the future.