Procurement Performance Management (PPM) and the future of initiative tracking

Procurement Performance Management (PPM) is a set of processes and technologies to enhance the efficiency and effectiveness of procurement goals like cost optimization, suppliers-, risk-, stakeholder-management, and innovation. In essence, PPM is driven toward achieving operational goals and strategic initiatives to increase the ROI of Procurement. 

The role of Procurement Performance Manager is growing in significance as procurement teams have strapped in for difficult times. PPMs are key players in shaping strategies that drive Procurement KPIs and company-wide strategy. They focus on improving processes, tracking savings, reporting, and capturing value. It’s their responsibility to ensure smooth communication between the Chief Procurement Officer (CPO), procurement teams, ESG functions, and finance departments.

Procurement leaders are faced with the daunting challenge of aligning procurement initiatives with financial goals and sustainability targets while navigating a complex landscape of data silos, inefficiencies, and misalignments. The stakes are high, as procurement decisions directly impact the company's bottom line and commitment to sustainable practices. But demonstrating performance tied to real numbers you can trust can be labor-intensive at best or untenable at worst. 

In this blog, we’ll cover how to radically improve your Procurement Performance Management and prove bottom-line impact across savings and sustainability initiatives. If you’re a CPO or Center of Excellence professional, this topic is more timely than ever as we enter a new era of AI-powered procurement analytics for PPM. 

Why traditional PPM doesn’t work: misalignment on initiatives

If managing savings initiatives was easy, you probably wouldn’t be here. Because of the many stakeholders and processes involved in aligning a savings or sustainability initiative with other teams, there’s a consistent problem with misalignment. 

The root cause of a lack of alignment on savings initiatives often stems from several interconnected issues, primarily involving communication, data management, and strategic alignment. Here are four common sources of misalignment in PPM: 

1. Scattered Information and Data Silos: Procurement, Finance, and Sustainability departments often operate with fragmented data systems, leading to inconsistencies and a lack of centralized information. This fragmentation results in communication breakdowns and inefficiencies as teams struggle to access the same data or interpret it in a unified manner.
   
   
2. Inconsistent Savings Methodologies: Without a standardized approach to calculating and tracking savings, different teams may use varying methodologies, leading to discrepancies and confusion. This inconsistency can create friction between procurement and finance teams when aligning savings with financial objectives.
   
   
3. Lack of Real-Time Visibility: Traditional reporting cycles (weekly or monthly) hinder real-time visibility into savings initiatives, preventing early risk detection and timely intervention. This lack of visibility often results in reactive rather than proactive management of initiatives.
   
   
4. Reliance on Manual Processes: Many organizations still depend on inneficient tools like Excel for managing savings initiatives. These tools are prone to errors and inefficiencies, slowing down processes and making it difficult to maintain accurate, up-to-date records.

The repercussions of poor alignment

Each of these can lead to damaging effects that hurt the quality and recognition of procurement initiatives:

Scattered data and manual processes lead to time wasted on managing complex savings projects. This inefficiency can delay decision-making and hinder the ability to adapt to new opportunities or challenges quickly.

Manual data entry and reporting increase the likelihood of errors, leading to unreliable data that can undermine trust and decision-making. This risk is particularly concerning when trying to prove the bottom-line impact of savings initiatives.

The absence of a unified platform and consistent methodologies can cause tensions between procurement and finance. This misalignment manifests in unclear project statuses and impact assessments, resulting in accountability challenges and missed opportunities for strategic value creation.

Finally, Without proper alignment and real-time tracking, procurement initiatives may fail to fully support broader organizational goals, such as cost savings and sustainability targets. This disconnect can diminish the perceived value of procurement within the organization and limit its strategic impact.

3 Principles for Improved PMM Alignment

Addressing misaligned initiatives requires a comprehensive approach that includes improving data integration, standardizing savings methodologies, and leveraging advanced tools to enhance visibility, alignment, and efficiency across procurement and finance teams.

Here are our top 4 best practices you can employ in your PPM process:

Establish a Common Language and Goals

Creating a shared vocabulary between procurement, finance, and sustainability teams can facilitate better understanding and collaboration. It’s recommended that procurement be aligned with standard financial practices using finance-friendly terminology. You can isolate non-controllable factors like FX and market index development, revealing actual procurement value and bottom-line impact. 

The same goes for KPIs and goal setting. Work alongside Sustainability teams to both achieve cost savings and reduce emissions through sourcing strategies. Through collaborative efforts, insights into which suppliers offer the best balance of sustainability and cost-efficiency can help decision-making.

Improve Communication and Collaboration

Fostering open and continuous communication channels ensures all teams are aligned and informed about ongoing initiatives and their progress. This can be done by establishing regular cross-departmental meetings, which enhance transparency and trust. Encouraging a culture of collaboration where cross-functional teams work together towards shared goals is essential. Implement systems that offer transparency into procurement processes and hold teams accountable for their contributions. 

In order to achieve the best results, many organizations are turning away from rigid processes towards more lean and agile procurement.  

Tech and Training

Adopting advanced procurement analytics solutions that provide accurate data for decision-making and automate insights is key. Implement systems that allow seamless data integration across departments. The modern firm will have diverse procurement activities spread across multiple regions, each using different systems for managing data. Accessing this data and combining it with visibility into other departments and initiatives will bring a better sense of trust in PPM. Investing in training and development programs that keep teams updated on the latest procurement practices and increase the adoption of tools. 

The need for better PPM solutions

Based on case studies with Sievo customers, we’ve drawn out a blueprint of the best practice for a Strategic Savings Process. Not only are multiple teams engaged in the process, but there is a constant exchange of data and information needed to align entirely on reported savings. We’ve colored in Blue the areas where Sievo’s Initiative Management module steps in to complement the process. 

Click to enlarge!

What this diagram illustrates is that many steps happen across multiple teams. To maximize value delivery, this process needs to be fast and efficient. But tools like Excel lack the connectivity and responsiveness to manage multiple data points in a trustworthy fashion. 

Initiative Management (IM) by Sievo is a sophisticated tool designed to revolutionize how procurement teams manage and track their initiatives, focusing on both financial and non-financial impacts. It is particularly suited for PPMs who aim to align initiatives with broader organizational goals. These roles typically require tools that offer high data accuracy, strategic alignment, and seamless integration with existing systems. 

We built IM with our customers to laser focus on what matters most for Procurement leaders:

1. Centralized Initiative Management: IM provides a unified platform for planning, tracking, and reporting on procurement initiatives. This centralization helps eliminate data silos and enhances collaboration across departments.
   
   
2. Advanced Savings Tracking: The tool offers comprehensive features for savings forecasting, tracking, and management, allowing procurement teams to minimize time spent on manual processes and focus on strategic activities. It integrates seamlessly with spend data to automate data input and track savings against baselines.
   
   
3. Sustainability and Non-Financial Initiative Support: IM supports a wide range of initiatives, including those focused on sustainability and carbon reduction. It integrates with Sievo CO2 Analytics to provide insights into Scope 3 emissions and identify reduction opportunities.
   
   
4. Real-Time Analytics and Reporting: With real-time reporting capabilities, IM offers detailed insights into initiative progress and savings realization. This feature is crucial for maintaining transparency and ensuring alignment with financial objectives.
   
   
5. User-Centric Design: IM boasts an enhanced user experience with intuitive interfaces and personalized views for different user groups. This design ensures high user adoption and engagement, facilitating smooth collaboration and efficient initiative management.
   
   
6. Seamless Integration: Built on cloud-native architecture, IM integrates easily with other Sievo modules and external procurement tools, providing a holistic view of procurement activities and enabling data-driven decision-making.

Sievo's Initiative Management is not just a PPM tool; it's a strategic partner for procurement teams that aim to drive value, enhance efficiency, and achieve organizational goals. With its robust features and user-friendly design, IM empowers procurement leaders to transform their initiatives into actionable results. 

Take it from a Procurement Director at a Manufacturing company who stated: 

“Each year since we took Sievo savings tooling into use, we have been able to exceed the savings targets we set for ourselves at the beginning of the year. I personally attribute a lot of this achievement to the Sievo solution enabling us to drive savings initiatives into realization.” 

Initiative Management addresses key challenges faced by procurement leaders by offering quick implementation speed, high ROI, and great user experience. Its cloud-native architecture enhances scalability and integration, making it an ideal solution for procurement teams seeking to enhance their performance and drive strategic value. To learn more about Sievo’s Initiative Management solution, schedule a demo or contact our sales team for more information.

Special thanks to Julius Seppänen for the commentary.

"Strategic Savings Process" created by Kalle Kangasniemi.