In today's dynamic business environment, organisations face increasing pressure to optimise their procurement functions while maintaining agility and control. The choice of operating model can significantly impact an organisation's efficiency, cost structure, and ability to manage risk. Let's explore the five main procurement operating models and examine how recent industry trends are shaping their adoption.
The Five Primary Operating Models
1. Decentralised Model
Once the traditional approach for many organisations, the decentralised model gives individual business units or geographical locations autonomy over their purchasing decisions. According to recent research by Deloitte, while only 22% of organisations now operate fully decentralised models, they remain prevalent in industries with highly diverse regional needs or where local relationships are crucial.
Best suited for:
Organisations with distinct regional markets
Companies with highly specialised local requirements
Businesses prioritising speed and local relationships
2. Centralised Model
The centralisation of procurement has gained significant traction, with McKinsey reporting that 61% of organisations have moved toward more centralised procurement functions in the past five years. This model consolidates procurement activities under one roof, enabling standardised processes and enhanced spending control.
Key success factors:
Strong governance frameworks
Robust technology infrastructure
Clear communication channels
Standardised processes across the organisation
3. Centre-Led Model
The centre-led model has emerged as a popular hybrid approach, with Gartner noting its adoption by 45% of Fortune 500 companies. This model balances central strategy with local execution, offering a compromise between control and flexibility.
Strategic advantages:
Unified strategy with local empowerment
Consistent policies with flexible implementation
Balanced stakeholder management
Enhanced knowledge sharing across regions
4. Outsourced Model
The outsourced model has seen renewed interest, particularly in specialised categories and non-core spend areas. According to recent industry surveys, 73% of organisations outsource at least some procurement activities, with technology and professional services leading the way.
Modern applications:
Category-specific expertise
Tail spend management
Specialised sourcing projects
Technology-enabled services
5. Hybrid Model
The hybrid model represents the future of procurement operating models, with organisations increasingly adopting a pick-and-choose approach. Research by The Hackett Group indicates that 67% of organisations are moving toward hybrid models that combine elements of different approaches.
Implementation considerations:
Clear governance structure
Well-defined decision rights
Technology integration
Change management capabilities
Current Industry Trends Shaping Operating Model Choices
1. Digital Transformation
The rise of digital procurement solutions is reshaping operating models across industries. According to Accenture, 84% of procurement organisations are investing in digital transformation, influencing their operating model decisions.
2. Sustainability Focus
Environmental, Social, and Governance (ESG) considerations are driving changes in operating models, with 76% of organisations reporting that sustainability goals influence their procurement structure.
3. Risk Management
The post-pandemic emphasis on supply chain resilience has led to a reassessment of operating models, with many organisations strengthening central oversight while maintaining local execution capabilities.
4. Talent Management
The growing skills gap in procurement has become a crucial factor in operating model design, with organisations increasingly considering access to talent in their structural decisions.
Making the Right Choice
When selecting an operating model, organisations should consider:
Current organisational maturity
Strategic objectives
Industry context
Resource availability
Risk appetite
Technology capabilities
Looking Ahead
The future of procurement operating models is likely to be increasingly fluid, with organisations adopting more flexible structures that can adapt to changing business needs. Key considerations for future-proofing your operating model include:
Building in flexibility to adapt to market changes
Incorporating digital capabilities from the ground up
Ensuring sustainability considerations are embedded in the model
Maintaining strong governance while enabling agility
Creating clear paths for talent development and retention
Conclusion
The choice of procurement operating model is no longer a one-time decision but an ongoing journey of optimisation and adaptation. Success lies not in rigidly adhering to a single model but in understanding your organisation's unique needs and creating a structure that can evolve with your business objectives while maintaining efficiency and control.
Organisations must regularly assess their operating model's effectiveness against changing business requirements and market conditions. The most successful procurement functions will be those that can balance control and flexibility while maintaining focus on value creation and risk management.
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