Daily Archives: July 7, 2011

How Do You Build a High Performance Supply Management Organization?

A recent study by Dr. Andre de Waal of the HPO Center that involved more than 3,500 organizations across 60 countries confirmed what leaders already know:

  • Leadership
    In High Performance Supply Management organizations, leaders lead with exemplary behaviour, make decisions, adopt a results focus, act with integrity, and coach staff. They don’t micromanage and do the work of their staff.
  • Talent
    Leading organizations have top talent that is diverse, complementary, and able to work well together. The talent is also flexible and resilient and committed to making the organization successful.
  • Openness and Action Orientation
    Everyone is involved in important processes through shared dialogue, change (for the better) is encouraged, and actions are taken to improve performance.
  • Continuous Improvement and Innovation
    There is an eternal focus on improvement and innovation.
  • Long Term Focus
    Long term success take precedence over short term profit. Management and employees are in it for the long haul and act that way.


Oops out of time
So tonight I’m gonna party like it’s 1999

  1999, Prince

Somehow SI gets the feeling this song was playing on the oldie’s station when Aberdeen was penning their recent piece on The State of Strategic Sourcing: Building a Context for the Next Decade. In a nutshell, their required actions would have been okay if penned in 1999 as necessary actions for leading supply management organizations for the next decade (although, in reality, they would have only taken an average organization through 2007). But in 2011 for 2020? Let’s just say SI liked Ariba’s predictions that data will predict the future, outsourcing will explode, and sourcing geeks will go the way of the dodo better. (Even though I hope it’s just a ruse.)

Normally SI ignores Aberdeen, as they haven’t, in SI’s opinion, put out anything good in years (as they lost their last senior analysts in the space a few years ago), but after having this particular piece brought to our attention, SI just can’t ignore it and how behind the times it is. Let’s put it this way, if a supply management organization thinks that the required actions are new and next level, it belongs in the bottom of the barrel in the laggard category. Let’s look at these required actions from the executive summary:

Leverage e-Sourcing solutions to drive higher savings and automate manual strategic sourcing processes
Just like every leading supply management organization has been doing for the last 10 years? This is advice for 2020? An average supply management organization has already squeezed every penny they can out of simple automation and standard reverse auctions, which most e-Sourcing suites revolve around. e-Sourcing is still the foundation, but now it is just the beginning of your Supply Management journey, not the destination.

Utilize spend analytics to drive visibility into corporate spending and forecast savings for future planning and budgeting
Wow! Two big problems with this. First of all, after the last two years, every executive and his dog has a “spend analysis”, “spend visibility”, or “spend reporting” tool that tells him just how much the organization is spending. What he needs to know is where the savings opportunities are. Just because the organization is spending 50M on fuel doesn’t mean there are any savings in the category. Maybe supply management saw the sharp prices increases coming and locked in low rates just in time. Maybe the real savings is in temporary labour where only 10M is being spent but where rates are still, despite recent increases in average labor rates, 20% above the norm. Secondly, spend analytics can’t forecast future savings. That depends on demand and input costs. Basic spend analysis just tells you what you spent, not where prices are going or where demand is going. The organization needs a real data analysis tool as well as good demand and price forecasting tools to get that picture.

Align overall sourcing activities/processes with the goals and objectives of the greater organization
Really? And should we also put our underwear under our pants? Supply management leaders have only been saying this for how long? Maybe SI should lighten up a little as it’s the only piece of advice that’s right, as supply management must be aligned with the rest of the business to be successful, but if this is not common sense to any supply management leader (who is also a business leader), there’s a fundamental problem in the organization that no action will fix. Plus, it’s a requisite, not an action!

The only action for success that SI can give you where this report is concerned is to burn it. The same-old, same-old is not going to get your supply management organization through the next decade. That’s why SI is spending so much time discussing next generation supply management and highlighting the efforts being taken by thought leaders such as Greybeard Advisors, The Mpower Group, and The Hackett Group to get the word out there. Supply Management must get to the next level, and it’s not going to do that rehashing technology from a decade ago.