The Blueprint for Operational Excellence

Target Operating Model (TOM)

A Target Operating Model (TOM) is a comprehensive framework that ensures alignment between your strategic goals and operational execution. It defines how functions such as procurement, value creation, and sustainability interconnect and operate cohesively across the organization.

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A Strategic Overview

A Target Operating Model serves as the backbone for integrating operations with strategy. It provides structure, transparency, and consistency across systems, processes, teams, and interfaces—ensuring that operational decisions align with organizational goals.

Unlike isolated optimization initiatives, the TOM offers a unifying framework that brings together processes, tools, and people. It operates above functional silos and supports a holistic view of value delivery.

The TOM encompasses:

Processes

Definition and execution of operational workflows

Organizational Structures

Allocation of roles, responsibilities, and reporting lines

Interfaces

Management of collaboration across departments and functions

Data & Tools:

Deployment of digital systems and analytics for better decision-making

Sustainability & Strategy

Integration of long-term ambitions into daily operations

One illustrative example is the Procurement Framework. While Source to Contract, P2P, or Supplier Management are essential processes, they only deliver consistent value when embedded in the TOM’s structured and strategic environment.

10 Key Principles to Optimize Your TOM

The design and implementation of a high-performing TOM starts with answering ten fundamental questions:

1

Which type of tasks/processes?

Identify key activities across the procurement lifecycle and related functions.
2

Which segmentation criteria?

Define whether tasks are segmented by product category, geography, business unit, or another relevant dimension.
3

How many resources are required?

Analyze capacity and optimize resource allocation to balance workload and efficiency.
4

Which degree of centralization is needed?

Determine whether your operating model should be centralized, decentralized, or hybrid.
5

Which organizational functions and depth?

Clarify functional responsibilities and the necessary depth of specialization.
6

At which hierarchy level should decisions be made?

Align roles and responsibilities with appropriate levels of authority and governance.
7

Who holds decision-making power?

Clearly define accountability and approval rights for different tasks and scenarios.
8

What form of cross-functional cooperation is required?

Establish how departments collaborate across workflows and functions.
9

What is the current and target level of digitization?

Evaluate digital maturity and determine which tools and technologies to deploy.
10

Who are the key players in implementation?

Identify the individuals and teams responsible for designing and executing the TOM.

By systematically addressing these questions, organizations can design a TOM that promotes clarity, drives collaboration, and delivers measurable value.

Procurement Process Organization

Tasks and Dimensions

Procurement is a core process dimension within any TOM. A well-structured procurement organization enables cost-efficiency, reliable supply, and resilient operations.

Key Procurement Workflows

Integrating these workflows into the TOM ensures alignment with strategic goals and unlocks synergies across departments and business units.

Organizational Structures Centralization and Roles

A robust TOM defines how procurement and other operational functions are structured and governed.

Centralization vs. Decentralization

Centralized model: Ensures standardization, cost control, and process consistency.
Decentralized model: Increases regional flexibility, responsiveness, and local autonomy.
Hybrid model: Combines global standardization with tailored local execution.

Hierarchy and Governance

The TOM sets clear governance rules by:

Appropriate hierarchy levels for decision-making.
Specific roles and responsibilities to eliminate ambiguity.

A well-defined structure supports strategic clarity, accountability, and operational agility.

Interfaces

Seamless Cross-Functional Collaboration

Strong interfaces are essential to ensure that departments work in sync. The TOM promotes structured collaboration across key operational relationships:

Procurement and Finance

Ensure budget alignment, cost control, and timely payments.

Procurement and Supply Chain

Optimize logistics, manage inventory, and coordinate delivery timelines.

Procurement and Legal

Embed compliance and minimize legal risks in supplier agreements.

Procurement and Operations

Align sourcing activities with production plans and operational demands.

Defined interfaces eliminate friction, reduce handover delays, and foster a culture of transparency and shared ownership.

Enabling Sustainable Efficiency with TOM

A Target Operating Model delivers the structure and strategic alignment needed to achieve operational excellence. By integrating essential dimensions—procurement, structures, interfaces, data, and sustainability—a TOM helps organizations operate more effectively and with greater resilience.

Whether you are redesigning your procurement function or optimizing end-to-end operations, TOM provides the clarity and consistency needed for long-term success.

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Streamline Processes, Optimize Structures and Drive Value Creation

Procurement processes — such as Source to Contract (S2C), Project Procurement, Purchase to Pay (P2P), and Supplier & Risk Management — are critical building blocks for operational success. However, their true potential is only realized when embedded within a broader framework that links individual activities to strategic direction.

At the heart of this framework lies the TOM itself: a central blueprint that connects corporate strategy with day-to-day operations. Surrounding this core are five strategic dimensions that enable the TOM to function as an integrated system:

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Target Operating Model (TOM)

Design and implementation of a future-proof procurement organization tailored to your business model. This involves the strategic alignment of procurement processes with business objectives to optimize efficiency and drive value creation. This includes adaptability to changing market conditions and technological advancements, ensuring long-term resilience and success.

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Strategy

Development of procurement strategies that are aligned with corporate goals and focused on value creation. This involves establishing clear category strategies and procurement objectives, ensuring that purchasing activities support broader business goals. Additionally, it includes a robust procurement KPI monitoring framework, which is aligned with controlling, to track and optimize performance across distinct categories and buyers while adapting to evolving market demands.

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Value Creation

Realization of cost savings and performance improvements through category-specific know-how and proven best practices for direct and indirect spend. Key enablers for savings include the analysis of price and process cost levers, as well as quantity levers. Success is driven by negotiation expertise, hands-on mentality, and strong market knowledge, ensuring effective engagement with suppliers and continuous optimization of procurement processes.

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Data & Tools

Integration of advanced tools and analytics to optimize procurement activities and unlock the full value of your data. By leveraging innovative software and analytical capabilities, procurement teams can enhance their strategic decision-making, improve spend visibility, and streamline operations. This data-driven approach empowers organizations to identify opportunities for efficiency gains and foster continuous improvement in procurement practices.

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Procurement Suite

Implementation of scalable procurement platforms that fully leverage the potential of digital transformation. These platforms enable seamless integration of procurement functions, enhancing transparency and collaboration across the supply chain. By adopting procurement suites, organizations can automate workflows, increase process efficiency, and support strategic sourcing initiatives, ultimately driving value and innovation in procurement operations.

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Sustainability

Strengthening ESG performance and building sustainable supply chains that meet regulatory and stakeholder expectations. By prioritizing environmentally friendly practices and ethical sourcing, organizations can reduce their carbon footprint and promote social responsibility. Implementing sustainability initiatives helps to mitigate risks, enhance brand reputation, and create long-term value while fostering transparency and accountability throughout the supply chain.

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Artificial intelligence

The demands placed on modern procurement are constantly increasing: supply chains are becoming more complex, costs must be reduced, and processes must be made more efficient. AI in procurement offers companies completely new opportunities to identify potential savings, minimize risks, and make strategic decisions faster and on a more informed basis.

Let’s design your custom Target Operating Model!

Your Contact

Dr. Bernhard Höveler

Partner & Managing Director

valantic Supply Chain & Procurement Consulting

+49 (0) 211 563875 0