Best Practices in forming Centers of Excellence

By:

Rob Handfield, PhD
Bank of America University Distinguished Professor of Supply Chain Management, Executive Director, Supply Chain Resource Cooperative
North Carolina State University

Centers of Excellence (COE) as an organizational entity have been around for more than 50 years.  Procurement COE’s involve bringing together experts to focus on a common set of activities, including business intelligence and analytics, technology, risk management, process redesign, e-sourcing, improved skills, P2P purchasing, SRM, and category management.  Execution and delivery of COE activities may be conducted by internal enterprise personnel, service providers, or some combination thereof. 

Types of COEs

In this report, we found there were two types of procurement COEs: “tight” and “loose”. A “tight” COE is a team that is set up specifically to bring together subject matter experts (SMEs) that have specialized and repetitive activities. A good example is a procure-to-pay (P2P) COE which is essentially a PO center, that does tactical transaction work. There is a tight scope of work and tight work rules. The COEs are geographically located to maximize labor arbitrage, and there is a strict discipline for work requirements.

A “looser” definition of a COE involves building insights for category management, risk analysis, market intelligence, etc. There is more ambiguity in the outcomes and the ways in which the outcomes are approached and achieved. These types of COE’s bring together subject matter experts in a different way – it is less of a transaction with rules, and more about the execution of strategies and business processes, and tools. Each type of COE has a different purpose and needs to focus on the particular type of work that needs to be done, and match the skill sets with those types of work.

Reasons for a COE

COEs are now more common than you might think. Among the CAPS survey respondents, 59% have at least one supply management COE, 10% are in the process of creating their first SM COE, and another 10% plan to create one within the next 1-2 years. The primary reasons given for the creation of a supply management COE were:

• Drive standardized and consolidated execution of targeted supply management processes (37%)

• Drive best practices across supply management and business units/regions/divisions (32%)

• Create skill-building and expertise for supply management in a central location (23%)

• Launch a new program or initiative, or revitalize a stalled one (9%)

To access the full research report, Best Practices in forming Centers of Excellence click here. 

CAPS is a B2B nonprofit research center serving supply management leaders at Fortune 1000 companies. CAPS Research inspires leaders with profound discovery and executable strategies to shape the future of supply management. Research reveals the destination, benchmarking charts the course, and networking creates the path to transformation. All CAPS offerings are sales-free, bias-free, and practitioner-driven. CAPS was established in 1986 at the W. P. Carey School of Business at Arizona State University in partnership with the Institute for Supply Management. Learn more at www.CAPSResearch.org.

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CAPS Research