Daily Archives: May 26, 2011

Is a New Age of Partnerships Near at Hand?

There is an interesting article over on the IndustryWeek site about how the world is coming to Partnership. Apparently the message that came from the Horasis Global Russia Business Meeting in Limassol, Cyprus in mid-April was that whatever happens in business, in nations, in economies during the coming months and years, we have to be working hand in hand. In otherwords, the message was that we’re partners.

It is definitely time for businesses, and the supply chains that drive them, to globalize if they want to be world class, but are true partnerships required? The first stage of globalization for an average business or supply chain is typically outsourcing. The second stage is typically expanding operations on site. Only in the third stage are true global business units created. But even then, partnerships are usually restricted to the most strategic of suppliers. True partnerships are few and far between, and most companies believe that if they want local market intelligence, production, and delivery, they either outsource the whole kit and kaboodle, or build a local operation and hire local talent. Many companies still don’t see partnerships with a local operation as a viable option.

However, I do agree that the smart people will form business partnerships that use technology to advance the interestes of both organizations as best-in-class organizations use leading technology solutions to increase their efficiency and effectiveness from spend analysis through sourcing to procurement and trade management.

Lessons Learned from Best-in-Class, Part IV

The following are some more of the lessons learned shared by some of the participants at this year’s Hackett Best Practices conference in no particular order.

15. Fish where the fish are
If a fisherman wants to catch a fish, it’s more likely that he will catch a fish in a lake filled with them then in a lake that is devoid of aquatic life. Similarly, it’s easier to find savings in a category rife with overpayments, maverick spending and/or contracted rates (well) above market average. Thus, if the Procurement organization wants to get some quick wins to establish credibility, it should focus on those categories that represent the largest opportunities.

16. Focus on efficiency of the company
Procurement efficiency is important, but corporate efficiency must come first. Procurment must put the good of the company first, especially if it wants to graduate from the kiddie table.

17. Governance and Sponsorship must start from the top
Since Procurement success will usually require change, and organizations generally resist change, support will be required to achieve success. However, success will be a lot more likely if support comes from the top as it may be difficult to overcome resistance without executive support.

18. Have a Talent Management Strategy
Procurement transformation and success will require top talent, and top talent, which is in critically short supply in Procurement, will require a talent management strategy to identify talent, recruit talent, retain talent, advance talent, and capture their knowledge when they move up. A critical part of this strategy will be to transition or use critical resources from other parts of the business either through cross-functional teams or re-assignments.

19. IT is Procurement’s new best friend
Not only will Procurement transformation generally require new processes and systems, which will require the support of IT (as reengineering takes time and expertise), but IT is often in a situation similar to Procurement — being asked to reduce cost while delivering more value. Together, Procurement and IT can work together to reduce costs, increase value, and gain more recognition and respect for both business units as they transform the organization to a world class organization.

20. Leverage outsourcers and outsourcing relationships
Sometimes the best way to get ahead is to outsource part of the Procurement function to allow the organization to do more with less or maximize the capabilities it has. Sometimes this will involve outsourcing the tactical parts of the Procurement function, such as transaction processing; sometimes it will be outsourcing generic categories such as office supplies, tellecommunications, or commodity hardware buys to a GPO where the organization “fits”; and sometimes it will be working with consultant organizations to get better results on strategic categories where the organization doesn’t have the (market) expertise to get savings (without sacrificing quality or reliability of supply) on its own.

Our next post will continue our overview of the lessons learned that were shared by some of the participants at this year’s Hackett Best Practices conference.