Bain & Company: Reinventing Procurement to Drive Sustained Profitability

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Brian P. Murphy, Associate Partner, Procurement
Procurement is undergoing an unprecedented disruption in terms of technology adoption and operating models. The pandemic has further accelerated this change, making it imperative for procurement processes to become transparent, agile, and data-driven. However, as the spending sentiment is in a downward spiral and companies adjust their resourcing for the impact of the pandemic, companies find themselves both understaffed and under-skilled. As such, they are subsequently unprepared for the potential spend recovery scenario once the company gets back up and running towards prior steady-state levels. Moreover, in a time when several suppliers have struggled to fulfill their commitments, the need for a complete and diverse supplier base has become more pronounced. The perennial challenge looming massive is of the savings not being percolated through to the budget and getting lost in the workflow transit.

To address these challenges, businesses must adopt a Procurement approach that is aligned with its overall strategy and incorporates digital tools that add systems-enabled efficiencies (such as P2P Automation and smart contracting). Bain & Company, headquartered in Boston, helps companies achieve this goal by guiding them on a cross-functional, transformational path to address their procurement challenges. But, instead of implementing point solutions aimed only at procurement and not considering the allied functions, Bain helps its clients zero in on the correct way forward that makes business sense for them even if it entails delving into ancillary functions. This, in turn, helps businesses tangibly realize their savings.

Instead of playing the role of systems integrators, Bain remains objective and works on bringing the holistic answer to its clients rather than aligning with a particular set of digital solutions. The company helps its clients succeed with the right answer, rather than using the same response in different cases. The company looks at an exhaustive set of levers and pulls not only those that generate quick-wins, but also more complex ones that typically have interconnected qualities with other business functions. Thus, it helps unlock the value that is dependent on other functions and that Procurement departments are unable to attain solely on their own.

Bain provides support in identifying cost savings opportunities through Buy Better and Spend Better levers, which encompass everything from demand management and supply rationalization to negotiating new agreements and comprehensive initiatives like make vs. buy analysis, and so on. For businesses that look for full procurement transformation, Bain takes charge of right-sizing the organization, building capabilities, and identifying and helping rollout digital enablers.

We will continue to build our strategic capabilities around supplier management, supplier performance risk, supplier diversity to help clients integrate better with their suppliers

These include, but are not limited to, cognitive sourcing and predictive supplier risk management.

With procurement departments being whittled down during the pandemic, businesses need to drive savings with minimal resources at their disposal. Bain works with companies in tandem to not only drive the savings but also to ensure that they develop capabilities along the way so that they become self-reliant. A testimony to Bain’s commitment to strong and long term partnerships with its clients is that the company continues to serve several clients who were planning to turn off projects citing lack of funds due to the pandemic. The company also has this exceptional capability to connect not only with its direct stakeholders but also with the C-suite executives, which allows Bain to push forward initiatives that otherwise would not be implemented. For instance, for a particular Consumer Products business, prior to Bain’s engagement, the company had struggled to get bold, model-changing recommendations off the ground and implemented. Bain then worked closely and collaboratively to help them frame up the right business case to articulate the system value that could be driven as well as the Results Delivery model needed to manage the change. That approach resonated with both the functional stakeholders as well as the executive teams, and those solutions were ultimately pursued generating run-rate savings north of $50 million annually.

Because procurement is still relatively immature compared to some of the other functions, Bain envisages a futuristic road map ahead for the company. “We will continue to build our strategic capabilities around broad cost reduction, supplier management, supplier performance risk, and supplier diversity. We will also leverage more digital capabilities, be it automation on the operational procurement side or using AI and machine learning to uncover strategic insights in spend data or market data in order to better collaborate and innovate with the supply base,” says Brian P. Murphy, Associate Partner, Procurement, Bain & Company.

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Brian P. Murphy, Associate Partner, Procurement

Bain & Company is a global management consulting firm that advises leaders on strategy, marketing, organization, operations, IT, and M&A, across all industries. The company has expertise in strategy, marketing, organization, operations, information technology, digital transformation and design, advanced analytics, transformations, sustainability, corporate finance, and mergers and acquisitions across all industries and geographies

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