There's a conversation that plays out in boardrooms and executive meetings across Australia with remarkable consistency. The procurement team is under pressure. Costs are rising. Contracts are expiring. Compliance requirements are tightening. Stakeholders want more from procurement — more savings, faster turnaround, better risk management, stronger sustainability credentials — and the response is almost always the same: try harder, move faster, do more with less.
But here's the thing most organisations eventually discover, often after a painful period of churn and underperformance: the problem isn't effort. It's design.
A procurement function can only perform as well as its operating model allows. If roles are unclear, if decision rights are muddled, if the team is structured for a world that no longer exists, then no amount of individual effort or new software will close the gap. The operating model is the foundation. Without the right one, everything built on top is unstable.
This article unpacks what a procurement operating model actually is, why it matters so much in the current Australian environment, the key design decisions organisations face, and how Trace Consultants helps organisations get it right.
What Is a Procurement Operating Model?
A procurement operating model is, at its core, the answer to a deceptively simple question: how does procurement work here?
It defines how the procurement function is structured, how it interacts with the rest of the business, and how it creates and protects value. It covers the people, processes, governance arrangements, technology, and performance frameworks that together determine whether procurement is a strategic capability or a transactional bottleneck.
More specifically, a well-defined procurement operating model addresses questions like:
What sits within procurement's remit, and what doesn't? Who makes sourcing decisions, and at what thresholds? Are procurement activities centralised, decentralised, or a hybrid of both? How does procurement interface with finance, operations, legal, and frontline business units? What category management approach applies, and how are categories governed? What technology platforms support procurement execution, reporting, and compliance? How is procurement performance measured, and who is accountable for outcomes?
These aren't theoretical questions. They are the practical design choices that shape day-to-day behaviour across the organisation. And too often, they go unanswered — or worse, they're answered differently by different parts of the business.
Why It Matters Now More Than Ever
Australian organisations are operating in an environment that has fundamentally changed in the past five years. The cumulative effect of supply disruption, inflation, regulatory expansion, ESG scrutiny, and labour market shifts has pushed procurement from the back office into the spotlight.
Consider the pressures. Government agencies must comply with increasingly complex probity and transparency requirements. Healthcare organisations are managing tighter budgets while maintaining critical supply continuity. Infrastructure and energy sector players are scaling up procurement pipelines at pace to support national priorities. Retailers and FMCG businesses are navigating volatile input costs and margin compression. And across all sectors, modern slavery legislation, sustainability reporting, and climate-related financial disclosures are creating new obligations that land squarely on procurement's desk.
At the same time, procurement workloads have grown significantly while headcount has often stayed flat. Teams that were sized for a pre-COVID world are now expected to manage more categories, more compliance requirements, more complex contracting, and more demanding stakeholders — all with roughly the same resources. The result is a function that's perpetually reactive, firefighting from one tender to the next, with little capacity for the strategic work that would actually move the needle.
This imbalance between what's expected of procurement and what the operating model can support is the root cause of much of the frustration executives feel. The team isn't underperforming — it's under-resourced and under-designed for the task at hand.
In this context, an ad hoc approach to procurement simply doesn't hold. Organisations need a deliberate, well-designed operating model that can absorb complexity, scale with demand, and deliver outcomes consistently — not just when the right person happens to be in the room.
The organisations that get this right tend to share a few characteristics. Procurement has a clear mandate. Roles and accountabilities are understood. There's a rhythm to how categories are managed, how suppliers are engaged, and how performance is tracked. And the operating model is designed to fit the organisation's reality — its size, sector, maturity, and strategic priorities — rather than being copied from a textbook or a competitor.
The Key Design Decisions
Designing a procurement operating model isn't a one-size-fits-all exercise. But there are a handful of design decisions that every organisation needs to work through. Getting these right is what separates procurement functions that deliver from those that simply exist.
Centralised, Decentralised, or Hybrid?
This is often the first and most contentious question. Should procurement decisions be made centrally by a dedicated team, or should business units retain autonomy over their own buying?
The honest answer is that neither extreme works well on its own. Fully centralised models can create bottlenecks, disconnect procurement from operational reality, and frustrate business units who feel their needs aren't understood. Fully decentralised models lead to fragmented spend, inconsistent supplier management, duplicated effort, and limited visibility for leadership.
Most Australian organisations land somewhere in the middle — a centre-led model where strategic procurement activities (category strategy, major sourcing events, contract frameworks, policy, and reporting) sit centrally, while tactical execution and day-to-day supplier management are handled locally. The art is in drawing the line in the right place, and making sure the interfaces between central and local are well governed.
This is particularly relevant for organisations with multi-site operations, such as property and hospitality businesses, healthcare networks, or government agencies with regional offices or facilities.
Decision Rights and Delegations
One of the most common failure points in procurement is unclear decision rights. When people don't know who is authorised to approve a sourcing strategy, sign a contract, or vary an agreement, the result is either paralysis or unchecked risk — neither of which is acceptable.
A good operating model includes clearly documented delegations of authority that reflect the organisation's risk appetite. These delegations should cover not just dollar thresholds, but decision types: who approves a new supplier? Who can extend a contract? Who signs off on a sole-source justification? Who is accountable when a contract underperforms?
In large organisations and government contexts, these delegations also need to account for probity requirements, audit expectations, and the separation of commercial and operational roles. Getting this wrong exposes the organisation to compliance failures and reputational damage.
Category Management Structure
How an organisation segments its spend into categories — and how those categories are managed — is a core design element of the operating model. Effective category management allows procurement to take a structured, strategic approach to the market rather than treating every purchase as an isolated transaction.
The Procurement Excellence Framework that Trace Consultants uses with clients provides a practical structure for assessing and designing category management approaches. It covers how categories are defined, who owns them, how strategies are developed and refreshed, and how performance is tracked over time.
A common mistake is to build a beautiful category taxonomy but then not resource it properly, or to assign category ownership to people who don't have the time, skills, or authority to actually manage their categories. The operating model needs to connect category structure to real people with real capacity and clear accountability.
Capability and Workforce Design
The people dimension of the operating model is arguably the most important — and the most frequently undercooked. It's not enough to have the right number of people. The function needs the right mix of skills, seniority, and experience to deliver against its mandate.
For many Australian organisations, the procurement workforce has evolved organically rather than being deliberately designed. You end up with a team that's strong in transactional purchasing but weak in strategic sourcing, or capable in one category but lacking depth across the portfolio. There may be gaps in commercial acumen, contract management capability, or data literacy.
Designing the right capability model means starting with the operating model and working backwards to determine what roles are needed, what skills they require, and where the gaps are. For some organisations, this also involves thinking about where external support — such as Procurement as a Service — can supplement internal capacity, particularly for surge workloads or specialist categories.
Workforce planning in the procurement context also means thinking about career pathways, development programs, and succession planning. It's hard to attract and retain good procurement professionals if the function doesn't offer a clear trajectory.
Technology and Data
Technology is an enabler, not a solution. But the right technology choices can dramatically improve the efficiency, visibility, and governance of a procurement function.
The operating model should define what technology platforms support procurement activities — from source-to-pay platforms and contract management systems to spend analytics tools and supplier portals. It should also clarify how procurement data flows between systems, who is responsible for data quality, and how reporting supports decision-making at different levels of the organisation.
Too many procurement technology implementations fail because they're disconnected from the operating model. A new system layered onto broken processes and unclear accountabilities just automates dysfunction. The operating model should come first, with technology deployed to support the design — not the other way around.
Governance and Performance Management
A procurement operating model without governance is a set of good intentions. Governance is what ensures the model is actually followed and that procurement delivers on its mandate.
Good governance includes regular reporting on procurement performance — savings delivery, pipeline status, contract compliance, supplier performance, and risk exposure. It includes forums where procurement and business leaders align on priorities and resolve escalations. It includes clear escalation paths and consequences for non-compliance.
Importantly, governance should be proportionate. A small organisation doesn't need the same governance architecture as a federal government department. What matters is that there's a clear rhythm: procurement reports on what it's delivering, leadership provides direction and removes barriers, and there's accountability for both.
Supplier governance is another dimension that many organisations underweight. Once a contract is signed, the value needs to be actively managed through structured supplier relationship management — regular performance reviews, KPI tracking, issue escalation, and periodic market testing. Without this, the savings identified during sourcing erode over the life of the contract.
It also includes periodic review. The operating model isn't a set-and-forget exercise. As the organisation's strategy evolves, as the market shifts, and as procurement matures, the model needs to adapt. Building a review rhythm into the governance framework ensures the model stays current and fit for purpose.
Common Pitfalls in Procurement Operating Model Design
Having worked with organisations across sectors, a few patterns emerge consistently when operating models fail to land.
Designing for the ideal, not the real. It's tempting to build a sophisticated, best-practice model that assumes capabilities, systems, and behaviours that don't yet exist. The best operating models are designed for where the organisation is today, with a clear roadmap to where it wants to be. A phased approach — moving from current state to an intermediate model and then to a target state — is almost always more effective than trying to leap to the end state in one go.
Ignoring the stakeholder landscape. Procurement doesn't operate in a vacuum. If business units don't understand or support the model, they'll work around it. Effective design includes early engagement with the stakeholders who will live with the model every day, not just the executives who sponsor it. This means finance, operations, legal, and frontline managers all need to be part of the conversation — and their feedback needs to genuinely shape the design, not just be noted and filed.
Over-engineering process. Some organisations respond to procurement risk by layering on process — more approvals, more templates, more checkpoints. At some point, this tips from risk management into obstruction. The operating model should make it easier to do the right thing, not harder to do anything at all. The best policy frameworks are ones that people actually follow at 5pm on a Thursday when delivery is under pressure, not 140-page manuals that sit on a shared drive collecting dust.
Confusing structure with capability. Reorganising the team and redrawing the org chart feels like progress. But if the same people are doing the same work with the same skills, the reorganisation hasn't changed anything meaningful. Operating model design must address capability alongside structure — what skills the function needs, where the gaps are, and how they'll be closed.
Treating operating model design as a one-off project. The design phase is important, but it's not the end. Implementation, change management, capability building, and ongoing governance are where the real value is realised. An operating model that lives in a slide deck isn't an operating model — it's a concept.
Disconnecting procurement from the broader supply chain. In many organisations, procurement operates in a silo — separate from logistics, planning, inventory, and operations. But procurement decisions have direct implications for how the supply chain performs. A contract that optimises unit cost but creates delivery unreliability, for instance, is a net negative. The most effective operating models integrate procurement within the end-to-end supply chain strategy, ensuring alignment rather than conflict.
How Trace Consultants Can Help
Trace Consultants is an Australian supply chain and procurement consulting firm that works with government and commercial organisations to design, implement, and sustain procurement operating models that actually work.
What sets Trace apart is a combination of specialist depth, senior-led delivery, and a relentless focus on practical outcomes. Trace's consultants have worked across government and defence, healthcare, FMCG and manufacturing, property and hospitality, and infrastructure — bringing cross-sector insight to each engagement while respecting the unique constraints of each industry.
Trace's approach to procurement operating model design typically spans several connected phases:
Diagnostic and current-state assessment. Before designing anything, Trace establishes a fact base. This involves mapping the existing procurement structure, understanding spend, assessing capability maturity, reviewing governance and delegations, and identifying pain points through structured stakeholder engagement. The goal is to understand how procurement actually works today — not how it's supposed to work according to the policy manual.
Operating model design. Working collaboratively with the client's leadership team, Trace designs an operating model that aligns procurement's structure, roles, governance, and processes to the organisation's strategy and operating context. This includes defining the centralisation model, decision rights, category structure, technology requirements, and performance framework. Importantly, the design reflects the organisation's maturity — it's built to be implementable, not aspirational.
Implementation and change management. Trace doesn't stop at design. Through its project and change management capability, Trace supports clients to implement the new model — standing up governance forums, transitioning roles, embedding new processes, deploying technology, and managing stakeholder communication. This phase is where most operating model projects succeed or fail, and Trace treats it with the seriousness it deserves.
Capability building. One of Trace's core principles is leaving organisations stronger than they found them. Operating model engagements typically include a focus on building internal capability — whether that's through formal training, on-the-job coaching, development of procurement tools and templates, or structured knowledge transfer. The aim is to ensure the organisation can sustain and evolve the model independently over time.
Ongoing support. For organisations that need sustained procurement capacity while the new model beds in, Trace offers embedded support through its procurement services, including go-to-market strategy, sourcing execution, contract management, and supplier relationship management. This provides a practical bridge between the current state and the target model.
Trace's Procurement Excellence Framework guides how operating models are assessed and designed, ensuring every initiative is grounded in a structured, repeatable methodology while being tailored to the client's specific circumstances.
Getting Started
If your procurement function is under pressure and the response so far has been to push harder rather than redesign smarter, it might be time to step back and look at the operating model.
The questions worth asking are straightforward. Is the current structure helping or hindering procurement's ability to deliver? Are roles, decision rights, and accountabilities clear? Does the team have the right capability for what's being asked of it? Is governance in place and being followed? Is procurement aligned to the organisation's broader supply chain strategy? And critically — does the operating model support the organisation's strategy, or does it reflect decisions made years ago under very different circumstances?
One practical starting point is a short diagnostic — a structured assessment of the current operating model against the organisation's requirements. This doesn't need to be a six-month project. A well-scoped diagnostic can be completed in a matter of weeks, providing leadership with a clear picture of where the gaps are, what's working, and where to focus first.
From there, the path depends on the organisation's context. Some need a full redesign and implementation. Others need targeted adjustments — sharpening delegations, standing up a category management rhythm, or building capability in specific areas. The key is to match the intervention to the problem, rather than defaulting to a generic transformation program.
If the answers are uncertain, that's not a failure — it's a starting point. And it's exactly where a structured, specialist-led review can add real value.
To explore how Trace Consultants can support your organisation's procurement operating model, get in touch with the team. Whether it's a short diagnostic to understand where you stand, or a full operating model redesign with implementation support, Trace brings the depth, pragmatism, and execution focus needed to turn procurement from a source of frustration into a genuine competitive advantage.
