Daily Archives: June 14, 2011

Ariba Vision 2020: Yesterday’s News

The following three predictions from Vision 2020 – The Future of Procurement were totally off the mark and, in SI’s view, could only have been made by someone living in a Procurement cave for the last 10 years as any organization that thinks these define a future state of Procurement has a lot of catching up to do.

03. Work goes mobile
Work has been mobile among the IT crowd for about a decade now and among the (management) consulting crowd for over five years. Just because some organizations are slow to catch on to the fact that modern technology allows you to work anywhere, anytime and keep in touch 24/7 through real-time video conferencing does not mean that it is visionary for an organization to finally latch on to this fact. Furthermore, any organization that takes another 10 years to latch on to this realization is probably not going to be in good shape in 10 years.

19. It’s complicated

Uhm, it’s been complicated for over a decade. It’s been complicated ever since the first Fortune 500’s first started to outsource critical manufacturing processes to India and China a couple of decades ago. And while the risks and complications will continue to change as the focus shifts to different emerging economies, it’s not going to get any riskier or complicated as a whole. There’ll be more awareness of the risks, which will appear to materialize more frequently as more operations are shifted global, but the risks and complications will be fundamentally no different than they were 20+ years ago.

20. It takes a network

Just like it’s been complicated since global sourcing started to materialize among the Supply Management leaders in the late 80s, it’s taken a network ever since the manufacturing giants (in automotive and consumer goods in particular) started outsourcing assemblies to tier 1 suppliers that integrated components from tier 2 suppliers. And the major Consumer Goods companies realized in the 90’s that in house was not enough. P&G laid the foundations for Innocentive in the 90s at the same time Unilever was focussed on developing better supplier networks across its global markets.

The next post will address Today’s Blues.

Getting to Value (Key NPX Take Away 2)

As per yesterday’s post, last week I attended The Mpower Group‘s Next Practices Xchange and took part in the discussion of what is required to get to the next level of supply management. There are no easy answers, as value is often context and situation dependent, but there are good questions and appropriate starting points in the quest for answers. Yesterday we discussed our perceptions of value and how they often differ from the stakeholder’s perceptions of value and how we need to speak a common language to make headway. Today we will discuss some of the steps an organization can take to get to value.

The first step is to align perspectives on value. To do this, the Supply Management organization needs to go beyond simply understanding the stakeholder’s view of value and genuinely explore value from their perspective. Supply Management needs to engage in an open conversation about what value really is to the internal customer and what Supply Management can do to help the customer realize that value. Once the shared vision is understood, then Supply Management needs to work with the organization to make sure that the key points of the shared vision are reached. For example, if the customer needs a deal in three weeks, then Supply Management may have to make cost or contract concessions to make sure that a deal is reached in three weeks. It’s not perfect, but it will give Supply Management credibility and increase the chances that Supply Management is not only approached much earlier in the contract cycle for the next category, but will be more trusted to work on issues that the customer organization does not yet see as highly valuable.

The next step is to do whatever it takes to accelerate from planning to actual execution. While Supply Management may see value in extended planning, analysis, negotiation, and contracting, the customer only sees value in the result. In early projects wth a customer organization, Supply Management will need to identify only the most critical issues that it feels need to be addressed and sacrifice the rest of its concerns to get to a contract that delivers value in the eyes of the customer as soon as possible. This may mean that it will have to restrict its attention to the current supply base, start with supplier’s paper, or trust the customer that the supplier does deliver best-in-class quality.

The third, and most important step, is to take the best deal in the customer’s eyes, even if it costs more, increases certain risks, or violates Supply Management standard operating practice, especially if it’s a first project from, or critical project for, the internal customer. For example, even if another firm offers to defend a case for $50,000 less, management must be comfortable with the firm selected. Sometimes $50,000 is a small price to pay to keep management happy. A key point that is often overlooked is that Supply Management must be seen as the go-to organization for advice and support where procurement and suppy is concerned and the central cog in the organizational wheel that keeps everything turning. That is going to require a lot of trust and respect from the other organizational units, and it will take time to build.

Along the way, the Supply Management organization has to make the finance organization a partner, garner and keep the support of top management, promote the competencies of its customers, and, most importantly, communicate the value it delivers in customer and organizational terms. For example, we got the best firm on the case for only $50,000 above market average is actually a win in the Chief Council’s eyes.