How can a few tips in the short term fundamentally change not just your long-term plans, but the way you plan altogether? Our Principal Advisor Helen Mackenzie writes.
Are you starting to plan for 2021 and what the next phase could be for your category or your team? Are you pondering what the future might hold and how to prepare?
Planning in time-horizon chunks, being in a “perpetual state of beta” and measuring your performance twice a week are just five of the ideas a group of senior US procurement leaders recommended for guiding your 2021 strategies at a recent Procurious Roundtable.
1. Time Horizon Chunks
Terence Mauri, founder of the Hack Future Lab urged us to think in time-horizon chunks. “Think about what’s probable for your business, suppliers and supply chains in the few next years? What could be plausible in a decade’s time? And then stretch that time horizon still further to envisage what could be possible in 20, 50 years’ time.”
2. Perpetual State of Beta
Mauri believes that our default mode of operation needs to be “a perpetual state of beta”. Referring the 4-24 Project, a movement seeking to encourage a questioning mindset, Mauri issued a challenge, “What’s the bravest question you can ask right now?” Could we start to prepare effectively for the post-Covid world by asking:
· why are procurement processes complex not simple?
· what do our stakeholders really need from us?
· can we collaborate with our suppliers in a more effective way and build trust?
But being more disruptive in our thinking requires practical application on the ground. And that’s where insight from Alex Saric, Ivalua’s Chief Marketing Officer at the Roundtable was invaluable.
3. Measure what Matters
“If we measure what matters”, advised Saric “that means we won’t let near term pressure derail long term direction.” He cited evidence from research undertaken by Ivalua and Forrester earlier in 2020 to prove his point:
The majority of high performing procurement organisations measure key performance indicators twice a week.
Not once a month, not quarterly, but bi-weekly. And the reason is that those KPIs are used to measure success and – importantly – to course correct when targets linked to long term direction aren’t being achieved. A great way to operate whether the pandemic is with us or not.
4. Strategic Not Tactical
And thinking about the way ahead, forward-thinking CPO Gareth Hughes from UK based Whistl, urged us to put the strategic, rather than the tactical, at the heart of our team structure. Gareth’s version of the perpetual state of beta is to dispense with category management, and “do the procurement that the business needs”.
By deploying a team with commercial focus, a curious nature and fine-tuned stakeholder engagement skills. Hughes urged CPOs to stay strategic, “Measurement needs to focus on commercial outcomes and increasing speed.”…
People remember you for the 80% of things you do well so make sure they’re the things that matter!
5. Promote and Measure Diversity
And keeping the focus on teams and people, our final speaker Naseem Malik, urged a focus on promoting and measuring diversity as a way to demonstrate procurement’s value post-covid.
Observing that procurement and supply chain continues to have the C-Suite’s full attention Malik urged CPOs to “Leverage your team’s supplier diversity expertise to help guide your organisation’s wider diversity efforts”. And, of course, measure the impact.
So preparing and navigating through the post covid period may be more a question of how we do it, rather than what we do. And whether it’s the quest for the perpetual state of beta, high performance or being more diverse, the key as always is to measure it and to measure what matters.
If you would like to find out more about Procurious Roundtables and the 2021 program email [email protected]
How can you centralise disparate tools and requests to receive, triage and manage work across the source-to-pay process without replacing your applications? It’s not as impossible as it sounds.
Are your stakeholders frustrated with finding their way through the procurement maze? As a procurement practitioner are you overwhelmed with navigating your way through a variety of disparate tools and requests, such as procurement, accounting and reporting, to get your work done?
Many organisations are increasingly improving the efficiency of the procurement process by implementing a “Procurement Service Desk,” which is a single, centralised user portal for stakeholder requests, routing, communication and PR/PO status reporting.
One-stop shop for “all things procurement”
By using one portal instead of multiple systems, the Procurement Service Desk provides seamless engagement for procurement and its stakeholders, which helps procurement organisations receive, triage and manage work across the source-to-pay (S2P) process. The single portal improves the overall user experience and outcomes with procurement for stakeholders, including requestors, legal, finance and operations.
With a Procurement Service Desk, stakeholders no longer have to spend days trying to figure out where to go, who to call, and what information is required to engage procurement. The platform provides procurement stakeholders with a simple user experience to submit procurement requests. A dashboard provides full visibility to requests and statuses throughout the end-to-end procurement process. Stakeholders and procurement now collaborate directly in the centralised portal instead of through numerous emails, files and phone calls.
Procurement organisations typically realise these value-based outcomes after implementing a Procurement Service Desk:
Automated triage of work to appropriate practitioners through intelligent routing
Improved user experience for clients, supplier and S2P practitioners
Workflow data captured in a structured manner for utilisation to improve processes, deliver efficiencies and provide an improved experience
Enablement of metrics that matter
Intuitive, easy-to-use platform
E2E flow supported by a single platform
Shortening the process through intelligent triage
Through the Procurement Service Desk, stakeholders submit requests covering the full S2P process, including sourcing, contracts, supplier onboarding, purchase orders and invoices. By using standardised processes and forms, the Procurement Service Desk ensures compliance and gathers required data from stakeholders.
Requests are based on standardised processes and forms, ensuring compliance and that required data is received upfront from the stakeholders. Because procurement professionals don’t have to chase down additional information from stakeholders, the Procurement Service Desk enables a more efficient process and quick turnaround times.
When a request is submitted through the Procurement Service Desk, the platform triages the request through intelligent routing rules to the appropriate procurement practitioner for no-touch handling.
Triage rules based on commodity, request value, country and supplier match the request with the most appropriate procurement practitioner. This automated triage ensures work gets to the right team quicker and more accurately, improving stakeholder customer satisfaction.
The Procurement Service Desk provides procurement with full visibility to the types of requests coming into the organisation through an executive dashboard, helping managers measure and address workload balance and required skills. The platform also provides improved data-driven insights based on the volume and types of requests received from stakeholders.
Integrating processes and systems
Because the Procurement Service Desk sits on top of an integration layer, the intake request process connects with the back-end disparate tools and micro services. Procurement manages their full workload in a single platform regardless of the back-end transactional systems. By sharing data from the intake process bi-directionally with the back-end transactional applications, the Procurement Service Desk eliminates data re-entry, improving process efficiencies and analytics.
The Procurement Service Desk also easily connects to other services, such as Marketplace and Analytics, making them easily accessible. Previously disparate tools and services, they now easily scale and function as a fully integrated platform.
After making the decision to move to a services desk, procurement organisations should begin looking for a system platform to manage the Procurement Service Desk and integrate their key systems. By working with a company with specific procurement experience, organisations reduce business disruptions and speed up implementation.
Learn how IBM Procurement Services can help to reduce business costs and meet the challenges of complex global enterprises through effective data-driven source-to-pay operations by visiting www.ibm.com/services/procurement
A robust Category Plan and a Strategy will guarantee significant impact for your organisation with these 6 elements.
In my last article “The #1 Reason You Need a Well- Defined & Formally Documented Category Strategy!“, I purposefully oversimplified what a category strategy is by stating that it answers the 5 W’s (Who, What, Where, When, Why) as well as the How of a particular group of spend. Ultimately, it will act as a guide to the Category Manager in his/her application of different procurement levers & tactics to generate value in the assigned spend area. I want to dive a little deeper on this topic by discussing 6 key elements that make up a robust category strategy:
1) Internal Needs Assessment: this should set a baseline for the category and provide a basic understanding of sub-categories, major suppliers, key requirements & stakeholders, internal controls/policies currently in place, and a brief category history and some of the challenges & successes it experienced. This section is particularly useful when reviewing your category strategy with someone who is unfamiliar with the category and it scope.
2) Spend Analysis: the foundation of any category strategy depends upon a solid understanding of the historical and (ideally) forecasted spend. Without accurate and granular detail, it’s hard to imagine how you can formulate any worthwhile strategy that you can feel confident in. If you didn’t do anything else in developing a category strategy, at least conduct a thorough spend analysis before making any type of recommendations to stakeholders or your leadership. There are a million different ways to slice and dice your data, however, at the bare minimum you should break your spend down by sub-category, supplier, location, and business group/facility. Data visualisation is worthwhile to mention here and a skill in itself: how do you take data and transform it into an eye-opening story that opens the door to powerful business insights? There are several data visualization tools out there like Tableau that can help with this, but you can never go wrong by simply utilising Excel or PowerPoint. One of my go-to formats to visualize spend data is the infamous Pareto!
3) Supply Market Analysis: understanding of the supply market is key to developing a robust strategy. You can begin by gathering market intelligence and benchmarking information via a myriad of places and sources, however, Beroe Live is a decent place to start and it’s free. Commonly used market analysis tools are the Porter’s 5 Forces model as well as the Structure, Conduct, Performance (SCP) model. Personally, I feel Porter’s 5 Forces model is more useful when entering a specific sourcing event or deal negotiation as it will help analyze the level of competition that exists at a specific point in time. Therefore, I tend to utilise the SCP framework as party of my category strategy development process.
4) Category Segmentation: segmentation modeling really sets you up to effectively apply the appropriate strategies for the goods/services you are sourcing and should help prioritize where you spend your time and with who. The Kraljic Matrix, developed by Peter Kraljic, is a segmentation model that evaluates two key factors:
1) the overall importance of the good/service (commonly based off total spend, profitability impact, or value-add to the company) and
2) market complexity or supply risk.
These factors are then evaluated on a Low to High scale across 2 x 2 matrix creating 4 quadrants or categories:
Strategic Items(High Value + High Market Complexity/Supply Risk)
Leverage Items (High Value + Low Market Complexity/Supply Risk)
Bottleneck Items (Low Value + High Market Complexity/Supply Risk), and
Non-Critical Items (Low Value + Low Market Complexity/Supply Risk).
Similarly, this tool can also be used to segment your suppliers. This is important to note because your counterpart on the other side of the table has most likely engaged in a similar segmentation process in helping them evaluate the strategies to deploy with their customers. Do you know where you fall in their model? Does your supplier/category segmentation align with how your supplier views you as customer?
5) Strategy: all the fact-based analysis that has been conducted up to this point should highlight and allow you to articulate 2-3 high level strategies that will guide all procurement activity that will occur (I highly recommend anyone engaged in Category Management to read “The Purchasing Chessboard“ as it is a great tool to stimulate thinking around category strategy, procurement levers, and tactics that can be deployed). It should also include goals or KPIs to help measure the effectiveness of its implementation. Leveraging 1 of the 4 general strategies in the The Purchasing Chessboard, if my strategy is to “Leverage Competition Among Suppliers” one of my goals or KPIs could be “Achieve 15% year-over-year costs savings in x good/service for next three years”.
6) Category Plan: now that you have this amazing strategy with lofty goals to save millions, a list of initiatives, projects or tactics must be developed that will deliver the results. The Category Plan should call out the name of the project, description of the project or tactic to be used, strategy alignment, value, and timing. A Project Prioritisation Matrix is a useful tool here to help you through this process. Although you may not formally develop criteria to plot your project on the matrix, it’s important to think about the Business Value and Ease of Implementation of the initiatives you have listed.
In summary, a category strategy is much more than a document that answers the 5 W’s as it becomes the critical guide to the Category Manager in his/her application of different procurement strategies, levers & tactics to generate value for the company they represent. By including these 6 elements in your category strategy, you are sure to deliver significant impact for your organisation and see transformative results.
Let me know your thoughts and the tools you utilize to develop your category strategies (I’ve created a Category Strategy template for those who may be just getting started!)
How do you set a strategy for your procurement function? Discover what to actually do.
How many times have you heard the word ‘procurement strategy’ throughout your career? Hundreds, if not thousands? And how many times have you seen one created and executed brilliantly?
In 2020, especially after this year’s crisis, we all know that a procurement and supply chain strategy is more important than ever. But it’s also more challenging than ever to create the right one, as we posited in our last article Procurement Strategy: What You’re Currently Doing Wrong.
So with all the challenges and complexities that a procurement strategy brings, is it possible to create an ideal one? One that goes beyond a ‘your wish is my command’ strategy, yet doesn’t make the mistakes inherent in a ‘market leader’ strategy?
It most certainly is. And here is how you do it.
Step 1: Assess and define
The first step in setting a strategy is assessing the one that you already have. Think you don’t have one? Think again. As we showed in our last article, all procurement functions have a strategy – whether they like it or not.
If you’re struggling to define your strategy, or it seems like it’s nonexistent, have a look at the choices and activities you undertake every single day. Are you constantly behind, putting out fires left, right and centre and at the mercy of your stakeholders? If so, you’re probably pursuing a ‘your wish is my command’ strategy. Or alternatively, are you rocketing towards an idyllic vision of ‘procurement best practice,’ focusing more on the doing side rather than consultation with your stakeholders? If this is the case, you’re pursuing a market leader strategy which, although it may seem ideal now, will soon lead you astray.
Assessing your current strategy will force you to confront the truth about what you’re doing but more importantly, what is and isn’t working. Understanding your mistakes here will help set you up to create a strategy that does work.
After you’ve discovered your strategy, the next critical step is understanding the strategic priorities of the organisation. For example, perhaps you’ve always been focused on costs, yet your business is more focused on quality? When undertaking this step, as procurement professionals, it’s tempting to pour our everything into it, meticulously researching our business, their competitors, and so on and so forth. Yet with all things strategy, the solution is more important than the problem, so ensure that you spend no longer than a few hours figuring out both your own strategy and that of your business.
Step 2: Identify stakeholders and laser-focus
From a stakeholder analysis perspective, the problem with the ‘market leader’ strategy is that, quite simply, the firm’s internal stakeholders aren’t consulted in its creation. Conversely, the problem with the ‘your wish is my command’ strategy is that stakeholders aren’t consulted here either – they are just left to make demands.
The obvious solution for procurement, then, is to identify your primary stakeholders within the firm, figure out your core offering to them, and define what you will be able to deliver, and what may need to be outsourced.
Dave Pastore, Senior Director, Sourcing Operations, at Corcentric, believes that identifying key stakeholders is absolutely essential to secure buy-in across the organisation:
‘You’ll find that some stakeholders are more inclined champions of procurement than others, identifying them early and collaborating with them will lead to a snowball effect on procurement’s successful collaboration across the organisation.’
To give an example of, let’s say that a business has recognised that their rate of returning customers is low, due to substandard product quality. The primary stakeholders who are concerned by this trend are the executive, customer service team and marketing team – and they are exactly who, from a strategic perspective, you’d need to prioritise. As a procurement function, then, your focus may be on sourcing new, higher-quality suppliers, while also carefully balancing cost considerations, as undoubtedly the finance team would still be a key stakeholder for you. With the focus on product quality, you may then choose to outsource quality assurance or administrative tasks, so you can laser-focus on what will add the most strategic value.
When considering the overall corporate strategy, and which stakeholders to prioritise, you’ll inevitably need to choose the parts of the strategy that you can influence the most.
Step 3: Consider your competitive advantage
When it comes time to decide which strategy to pursue, your decision-making process should be similar to the way that any business decides their own strategy: by figuring out your competitive advantage.
Think about it. How does Starbucks get ahead? By providing better value coffee than Dunkin’ Donuts. And McDonalds? They need to find their unique value proposition and deliver on it, vis-a-vis Burger King. As strange as it may seem, this is no different from you and your procurement strategy.
Diego De la Garza, Senior Director, Global Services, at Corcentric, believes that your competitive advantage may not be just one thing, but rather it should evolve over time:
‘Your competitive advantage should evolve as the environment of the organisation changes, one day the organisation is ripe to capture savings and the next is prioritising process automation.
‘Procurement competitive advantage is predicated on its ability to deliver value to what the organisation needs most.’
Even if your competitive advantage is something that evolves, it still can be challenging to discover. For example, it clearly doesn’t make sense for procurement as a function to compare themselves against other internal functions, such as finance. It also doesn’t make sense for procurement to compare their own function to procurement in another organisation, as that business may have a totally different strategy. Procurement, as with all other internal functions, has an effective monopoly within each individual organisation, so comparison is hard. Often, the most effective comparison is an outsourced provider.
This can often be a useful starting point to define your competitive advantage, though. All things considered, what value can you deliver that an outsourced provider cannot?
Step 4: Play to win
Once you start to understand what value you might be able to offer your organisation, and your stakeholders in particular, create several different strategies with different focuses, and then decide on the one you believe will have the highest chance of success. For example, with the situation described above, you may decide to focus on procuring higher-quality suppliers, or alternatively, technology that can guarantee better quality assurance.
You won’t know which strategy will be the most successful, of course, but ensure that you’ve comprehensively consulted your stakeholders to maximise the best outcome. Then, throughout your implementation, make sure everyone is continually consulted, and informed, especially if requests akin to the ‘your wish is my command’ strategy start creeping in.
Stakeholders are well and truly key to a successful strategy, says Dave Pastore:
‘A key to ensuring the successful adoption of your procurement strategy is to collaborate with those who will be most impacted by it: your stakeholders.’
We all know that strategy is important – but equally, that it’s hard. But by understanding your company’s strategy, then figuring out your competitive advantage as a function and, finally, consulting with your stakeholders, you’ll have the best chance of creating and implementing a strategy that will add the value you know you can bring.
What challenges have you had in setting your procurement strategy? Let us know in the comments below.