June’s Technology for Procurement Forum in San Francisco, put on by EyeForProcurement, had some really good presentations. In this post, I’m going to convey some of the highlights, and associated insights, in order to encourage you to consider attending this conference next year. (It also had some weak presentation, but it was the first year of this particular conference, and I’ve never been to a conference that didn’t. However, since conferences that adequately focus on technology, which is a vital tool for today’s sourcing professionals, are few and far between, it’s important to recognize when someone tries to pick up the slack.)
In John Ferguson’s (Vice President and CIO of Optical Cable Corporation) keynote on Technology and Procurement, The most profitable way to leverage your technology – and rise above the competition, he reminded us that technology is, at most, a tool, that one size does not fit all, and that tools that support different strategies are required for best results. After all, no matter how hard you try, software can’t fix a broken process and the only thing worse than a broken process is an automated broken process.
Furthermore, it’s also critical to understand that a technology focussed project will often take a lot longer than you expect to both complete and to see a return on, especially if it involves business process improvement. Process improvement requires time, effort, and considerable change management that should never be underestimated due to the human factor. That’s also why you should not automate for the sake of automating – make sure there is a significant return waiting to be realized.
With respect to sourcing, according to John, you should buy high volume components as commodities from the same sources as your competitors whenever possible, buy components with volatile demand cycles as needed, and make an effort to be the easiest business partner to deal with. Furthermore, your strategy should focus on penetrating less-commoditized markets through differentiated product and service offerings.
In John Cleminshaw’s (Director of Global Quality Systems Procurement at Whirlpool) keynote on the strengthening of your procurement core, Technology that improves your financial and customer focus, he focussed on the importance of process-based management and that your procurement cycle must include participation in the design, manufacturing, and logistics process flow, as these can be sources of considerable cost that will be “locked-in” if not done right.
John also offered some suggestions on how to develop a process-based system.
- Document the Present System
how does it work? what’s missing? what are the gaps costing us?
- Revise the Process
complete it, add efficiency, and make changes if necessary
- Turn the Process into a System
preferably, find an existing best-of-breed COTS
(Commercial-Off-The-Shelf) system as it is time consuming and
expensive to develop a custom system
- Make the System Visible
and take steps to integrate into project and product management
- Communicate Objectives
- Align Expectations
make sure everyone is on the same page!
In Betsy Miller’s (Corporate Director, Sourcing and Procurement Corporate Contracts of Northrop Grumman Corporation) keynote on global technology management, How to organize and manage the technology aspect of numerous buying platforms across a variety of geographical locations, we found out that an aggressive focus on supplier master data cleansing, commodity spend aggregation, and e-Sourcing can generate a 6% to 12% savings opportunity and that if you are a multi-billion dollar corporation (30 B ) and can apply this rigour to 40% of your spend, then you can, rather easily, save nine digits. (Or, more precisely, a number so large you might not be allowed to tell the public just how much you saved!)
According to Betsy, the drivers that you need to focus on are:
- Value Optimization
a focus on better contracts
- Sourcing Optimization
a focus on strategic partnerships and risk management
- Process Efficiency
focus on common processes
- Complexity Reduction
focus on process streamlining and the elimination of unnecessary steps
- Supplier Collaboration
and capability development
- Organizational Empowerment
focus on visibility
Nothing you haven’t heard before over the past year both here and on Spend Matters, but us bloggers always appreciate not being the only ones trying to drive home certain points!