Digital Technology
Jul 11, 2018

Disrupting procurement with digital

In recent years, several multinational corporations have formed separate procurement companies to centralize the function. Commonly referred to as "ProCos," these companies often manage much of the corporate P&L through third-party spend – a strategy driving many benefits. The question now: Can today's digital solutions help create a digital ProCo – or "eProCo" – that challenges the traditional ProCo set-up?

The digital procurement company

Given the rapid development of digital tools, I believe that any ProCo strategy should have digital at its core. Designing with a digital mindset is what distinguishes companies with a digital-first perspective. This approach makes global sourcing more efficient while securing decision-making at the eProCo level. The eProCo can then apply sourcing recommendations to amend supplier contracts instantly, freeing it to focus on pure value generation and hire employees who drive strategic deals globally. In that environment, staff are positioned to unearth new value and revenue opportunities by leading category, sourcing, and supplier management.

Immediate measurable benefits

Here's how one of our clients benefited by establishing a ProCo. After creating a global procurement company in Luxembourg, the company secured incremental and predictable net income of $150 million over a three-year horizon. In addition, the procurement leadership immediately became global, bringing category and regional knowledge as well as complementary skills under one roof, thus making the supply base progressively more competitive. What's more, because of its location, the procurement management team now interacts with the entire world in a single day – beginning with Asia in the morning and ending with the Americas in the afternoon. That had been hard to do when the team was based in the US.

Setting up an eProCo can truly transform your entire operation – and doing so will likely deliver performance surpassing that of traditional procurement company models. The time to make the change is now.

About the author

Jean-Luc Renevot

Jean-Luc Renevot

Senior Director, Value Chain Transformation

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