A procurement health kick for a new spin-off

Spin-offs are always complicated – especially if you're the new entity. There's uncertainty about new ways of working, operating models and procedures, and technology. They have the opportunity to be as agile as a smaller company but must first overcome the historical complexity they've inherited from the parent company.

That was the situation facing this healthcare company. But with the added complication of aggressive cost efficiency targets initiated by the parent company across finance and procurement, supply chain, and IT functions, leaving little wiggle room to improve efficiencies while holding down costs.

The procurement team faced some big challenges, including:

• A fragmented technology landscape of about 180 different systems, redundant applications, and technical debt from prior acquisitions
• A SAP S/4HANA global deployment in other areas of the business that had interdependencies with S2P processes
• Inconsistent and sometimes manual processes and overall low digital maturity in the existing S2P environment
• No single source of truth for procurement data, reporting, and analytics
• No operating model across the procurement and shared services lines of business
• A requirement to minimize the costs of any S2P transformation

As a result, the company was putting margins at risk as well as facing risks from unvalidated suppliers. Plus, the overweight technology stack was costly, and there was a definite risk to business continuity as separation from the parent company became final. The company needed a trusted advisor with deep procurement experience and digital expertise to help it overhaul its S2P technology and processes.

We started with a fact-finding mission: conducting stakeholder interviews across finance, IT, procurement, and accounts payable teams to understand current processes, technology, and people. This allowed us to map existing processes and recommend a streamlined operating model as well as best-in-class technology applications that would improve operations and reduce technical debt.

We also performed a baseline review of all existing documentation and benchmarked the company's S2P processes against its peers. This set the tone for transformation and encouraged employees to engage positively with the changes.

Our key milestones included:

• Rationalized and recommended S2P technology applications with an integrated implementation plan, leveraging S/4HANA as the backbone of S2P alongside a roadmap to the future state post-spin-off
• Developed key policies, processes, and metrics for the company's ideal future state and implemented them globally to increase adoption across all regions
• Conducted due diligence across all S2P process areas and tied them back to key metrics and a governance framework to strengthen the function by increasing visibility of measurable outcomes
• Developed and implemented a global target operating model across the S2P function, with a reporting framework for enhanced decision-making

Our pragmatic, nimble approach ensured that the project was delivered across people, processes, and technology on time and in full. The client now has a robust S2P function with a scalable future state with lower margins and operating risks. We helped establish:

• ~65% reduction in the number of S2P applications
• 180 fewer system integration requirements
• 30%–40% reduction in redundant and manual process steps
• 50%–60% reduction in policy lines
• Cross-function collaborations to ensure enterprise-wide technology decisions
• An established target operating model for North America and EMEA regions with the potential to boost efficiency by 15%–30%

The project laid the foundation for a best-in-class S2P function, and the company hired its S2P operating teams in line with our recommended target operating model.

Next up for our partnership? More critical transformation projects across finance and procurement.