PROCUREMENT

MATURITY

Procurement maturity refers to the level of sophistica-

tion, effectiveness, and efficiency of an organization's
PROCUREMENT MATURITY

procurement function or processes. It assesses an orga-

nization's ability to strategically manage and optimize its
procurement activities to achieve desired outcomes.

A procurement maturity model is often used to evaluate

and classify an organization's maturity. This model typi-
cally consists of stages or levels representing progressive
improvements in procurement capabilities.

The progression from one maturity level to the next in-

volves improving processes, enhancing capabilities,
adopting best practices, and aligning procurement with
overall business objectives. Higher maturity levels typi-
cally result in increased cost savings, risk mitigation, sup-
plier collaboration, and overall organizational efficiency.

Assessing procurement maturity can help organizations

identify areas for improvement, set goals, and develop
strategies to enhance their procurement function. It en-
ables them to move from a transactional and tactical ap-
proach to a more strategic and value-driven procurement
function contributing to the organization's success.

Stages of Procurement Maturity

Note that each cycle relies on the competencies developed in the preceding
cycle. For each stage outlined, the cycles contributing to the maturity of the
previous stage need to be continually followed.

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 There are four stages of Procurement Maturity Model, and they are as follows:

01
Strategic and Operational Procurement
In this initial stage 1, companies invest in goods and services without any strategy. The finance team manages the budget
without asking questions, and there’s no focus on quality or service levels. Employees who purchase the solutions run
purely tactical operations.

01

03

Procure-to-pay cycle:
This is the most common procurement Request-to-receipt cycle:
cycle, where covering the entire pro- This cycle covers the activities from
curement process, from identifying the the time a request is made until
need for a product or service to final
Source-to-contract cycle:
This cycle includes all the activities the goods or services are received.
payment. It includes steps such as pur- It includes steps such as purchase
required to identify a supplier and ne-
chase requisition, purchase order, requisition, purchase order, and
gotiate a contract. It involves steps
goods receipt, invoice verification, and goods receipt.
such as supplier identification, request
payment.
for proposal (RFP), supplier selection,
contract negotiation, and contract ex-
ecution.

1. Identify 1. Identify 1. Identify 10. Execute

Need Need Needs Payment

2. Identify 2. Review
Sourcing 9. Execute 2. Conduct Current Price
9. Execute 9. Approve
Requirement Payment Market List/Contract
Contract  Invoice
(sole source, competitive Research Update if
bid, negotiation or
current contract) Needed

3. Develop 3. Create 8. Inspect

3. Create 8. Approve 8. Negotiate
Sourcing Purchase Goods/
Requisition Payment Contract
Strategy Requisition Services

4. Create 7. Conduct 7. Receive

4. Approve 7. Verify 4. Approve  
Sourcing Supplier Goods/
Requisition Invoice Requisition
Team Evaluation   Services  

5. Create 6. Receive 5. Identify 6. Identify 5. Create

Stakeholders 6. Send PO
Purchase Goods/ Potential Purchase
& Create to Supplier  
Order Services Suppliers Order
RACI

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02
Tactical
02 Sourcing Procurement
In stage two, the organization’s management starts seeing potential cost savings. It hires procurement professionals to
help them purchase goods and services and oversee and negotiate contracts. Technology increases the number of events
and the value they deliver.

2 4
Source Plan
to to
contract inventory
cycle cycle
1 3 5
Procure Request Contract
to to to
pay receipt pay
cycle cycle cycle

Plan-to-inventory cycle: Contract-to-pay cycle:

This cycle involves the planning and management of This cycle covers the activities related to the payment
inventory. It includes steps such as demand forecast- of invoices against the contract. It includes steps such
ing, inventory planning, inventory management, and as invoice processing, payment approval, and pay-
replenishment. ment execution.

1. Work with
8. Storage 9. Execution Accounts
1. Demand
of Raw of Manufac- Payable
Planning to understand issues
Materials turing as described when
they occur.

7. Quality 10. Quality

2. Supply Inspection Inspection of 2. Document
Planning of Raw Finished Each Issue
Materials Goods

6. Develop
6. Receipt
3. Production 11. Storage of 3. Determine Alternate
of Raw
Planning   Finished Appropriate Solutions as
Materials 
Goods Resolution Necessary.

4. Work With
4. Execution 5. Procure- Supplier to 5. Keep
of Produc- ment of Raw Resolve and/or Stakeholder
tion Plan Materials Escalate as Informed
Needed.

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 03 Category
02
Strategy Procurement
In stage three, the value provided by category managers is limited by the technology available to scale. When they need
more technology or have limited access, they encounter problems with the scenarios, models, and analytical capabilities.
Managers can still focus on strategy and add weight, but it will be limited. Strategic sourcing can help them at this stage.
They can also choose how to award specific contracts by considering constraints and budgets.

2 4 6 8
Source Plan
Supplier Category
to to
performance management
contract inventory
cycle cycle
cycle cycle
1 3 5 7
Procure Request Contract Supplier
to to to relationship
pay receipt pay management
cycle cycle cycle (SRM) cycle

Supplier performance Supplier relationship Category management cycle:

cycle: management This cycle focuses on the management of specific categories of
This cycle covers the activities (SRM) cycle goods or services. It includes steps such as category analysis,
related to monitoring and man- strategy development, supplier selection, and performance moni-
aging supplier performance. It This cycle involves the ongoing toring.
includes steps such as supplier management of supplier rela-
evaluation, performance mea- tionships to ensure they meet (If this still needs to be done, establish categories consistent with how pro-
the organization's needs. It curement obtains goods and services while ensuring alignment with finan-
surement, and supplier
includes steps such as perfor- cial reporting elements). (See sample category plan spend analysis tem-
development. plate and O/A Analysis matrix for a category look at spend breakdown in
mance monitoring, communica-
Jim Moran’s Procurement League Core Fundamentals series of procure-
tion, and collaboration.
ment classes under Bundle D Category Management). (Category manage-
ment as a cycle is typically three years in length with a focus on improve-
(Similar to performance cycle steps,
ment and sourcing plans to address specific areas of spend once during
1. Review Key but supplier tier (Strategic, Preferred,
the process, so approximately 1/3 of spend is analyzed and addressed each
Performance Leveraged, Approved) will determine
year subject to industry and marketplace macro-environmental impacts).
Indicators the needed level of effort. Strategic is
high effort, preferred less so, lever-
aged based on fulfillment compli-
ance, and approved suppliers are 6. Include
usually managed on cost and lead 1. Design Data in
2. Collect time compliance. Performance Mea- Category Performance
Measure- surement Results will determine the Plan Monitoring
ments frequency of the bid cycle. Reports

2. Review with 5. Report

6. Create Functional Findings to
1. Segregate 2. Include this /End your stakeholder
3. Identify Change
your Supplier Segregation users leaders' team and procurement
Issues Order if into your category and outline any
Portfolio and procurement
changes to plan
Needed. planning in order
according to the leadership
to develop your
designations
sourcing needs
described above
annually 4. Bases on the data
3. Collect and collected for spend
4. Conduct Record Spend as outlined in the
5. Review with trend analysis sample described,
Root Cause with Supplier quarterly and annu- determine opportu-
nity for savings
Analysis ally
improvement

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04 Innovative
02
Procurement
Businesses can drive innovation with help from their suppliers by partnering with them. In this state, procurement and
sourcing leaders work closely as partners to identify ways for the company to get more value from its purchases and
rethink relationships with suppliers.

2 4 6 8
Source Supplier
Contract relationship Spend
to to
contract management analysis
pay (SRM) cycle cycle
cycle cycle
1 3 5 7 9
Procure Plan
Supplier Category Contract
to to
performance management management
pay inventory
cycle cycle cycle
cycle cycle

Spend analysis cycle: Contract management cycle:

This cycle involves analyzing spend data to identify This cycle involves the ongoing management and moni-
opportunities for cost savings and process improvements. toring of contracts to ensure that both parties fulfill their
It includes steps such as data collection, cleansing, and obligations. It includes steps such as contract adminis-
analysis. tration, performance monitoring, and contract renewal
or termination.
(Total spend can be used to identify opportunities for cost reduc-
tion, typically through Pareto analysis, but does not consider the
tail spends vendors spend for the same products). (Using spend 10. Report
analysis under a category management structure should enable 1. Obtain Re-
Concerns to
a fuller picture of spend and better opportunities to consolidate ports from
Category
the vendor base for like products, thus improving the buyers Contract
Stakeholders
leverage and improving opportunities to reduce spend. A catego- Repository and procurement
ry management approach will also assist in reducing maverick Monthly leadership

or non-compliant spending).
2. If Able, 9. Transfer
Marry Con- Data to
tract Listings Supplier
1. Obtain Performance
to a/p Spend
Spend Reports Reports
monthly and sort by Reports
highest to lowest
spend by vendor on upcoming renewals, expira-
tions based on category plans 8. Merge
reporting on milestones for 30 3. Develop
Order Fulfil-
days, 60 days, 90 days and 180 Reports for
5. Develop days (if needed for IT SaaS ment Data with
2. Create Vari- contracts). (Incorporate con- Distribution reports to identify
Action Plans tractual timelines on renewals to Owners KPI variances
ance Reports
to expected con- to Address and/or terminations).
tract spend by and Imple-
vendor
ment 4. Identify 7. Merge Con-
any Concerns tract Reports
Occasioned with A/P spend
3. Examine 4. Prepare data to identify KPI
(price increases by the Cate-
Data for Root Reports and variances
outside of contract, gory Plan
non-compliant Cause of Review with
spend with maverick stakeholders and
suppliers, etc.) variance your management 6. Meet with
in the contract repository and
5. Distribute
request timely response so Category
notices can be delivered to Reports to
Stakeholders
suppliers per the contract if the Contract to review the data
needed.
Owners Iden- and update the
category plans as
tified needed.

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 Procurement Maturity
Model Advancements
Organizations need to be efficient in using people, processes, and technology. Moving to the higher stages of the maturity
model lets the company make purchases strategically, manage spend, and get results that improve the bottom line.

Procurement needs to change gradually to reap long-term benefits. It risks disrupting budgets and creating a mess if it
moves for full-scale digital transformation without being ready. Consider the areas that need optimization most in the
company, such as the procure-to-pay process through cloud-based software to streamline the process, standardize
information, and gain control over spend data.

Companies with the best workflows have all their spending processes, such as invoicing and payments, streamlined on one
platform and are also beginning to incorporate ESG into their operations.

For the Supplier Relationship Management Spend Analysis and Contract Management cycles, various elements of each will
typically be used in stages 2 and 3.

In addition to managing these processes and sourcing new items, the organizations should tap into community intelligence
data to make smarter buying decisions.

Thank you
for your time and attention.

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