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.