Are you Really Focussed On Value? (Key NPX Take Away 1)

Last week I attended The Mpower Group‘s Next Practices Xchange which is a gathering of some of the top supply management personnel from a select group of Fortune 500 companies who met to discuss how to get to the next level of supply management. Realizing that today’s best is not enough to sustain value in an increasingly competitive and economically challenging global marketplace, the best of the best are already trying to figure out how they are going to maintain their edge in tomorrow’s supply chain landsape. It’s a hard question that is not getting enough attention (as per my recent posts on Next Generation Sourcing and Supply Management), but there are answers to be found for those willing to look hard enough. This series will address some of the questions that a Supply Management organization needs to address to get to the next level, as well as providing some starting points for those looking for answers.

Whether you call it Next Level Supply Management, Next Generation Supply Management, or simply Next Practice, the key commonality to advancing the supply management function is moving from a cost focus (even if it is TCO) to value. However, before one can get to value, one has to understand what value is. Lamar Chesney, CPO of SunTrust, had a great presentation on value perspectives and how our view of value is rarely their view of value and how we fail to realize the value that is available in a Supply Management initiative because of this.

For example, while everyone may agree that price reduction is value, our view of value is generally not their view of value.

When we focus on What they really want is
cost avoidance speed to realization
TCO sense of comfort
specificity of deliverables practical certainties
contract certainties and flexibilities feeling of specialness
risk mitigation and governance contributions beyond sourcing & SRM

And, more over, this is how a Supply Management organization often responds to their view of value (even if the Supply Management organization does not realize it is doing it):

What they want What we believe
speed to realization speed kills
sense of comfort a good contract trumps the soft stuff
practical certainties a good contract, which can take months to negotiate, insures you get what you want
feeling of specialness everyone knows the supplier is providing a commodity and there’s nothing special about the product or service
contributions beyond sourcing & SRM sourcing strategies, contract management, category management, SRM, etc substitutes nicely for my help with your business strategy

See the problem? Not only does the (internal) customer rarely want what Supply Management wants to deliver, but the messages that Supply Management sends scares the internal customer away because the core message the internal customer hears is that what you value doesn’t matter. Not a good foundation for building the cross-functional team necessary for generating value.