Daily Archives: October 10, 2011

If You Want To Be Sustainable, Be Consistent

Over on the Procurement Leaders Procurement Blog, Steve Hall penned a good post on the importance of consistency in sustainable sourcing. In particular:

  • consistency in the way Procurement speaks to stakeholders and members of its supply chain(s),
  • consistency of the message across the company, and
  • consistency across the community as well.

This is because there is a lot of confusion around sustainability and environmentally friendly, thanks to overuse, and, more importantly, misuse by PR “pros” around the globe. Harking the need for responsible sourcing and a confusion free lexicon, Steve zeros in on the importance of consistency because if a company can identify what a sustainable product is, they’re in a position to tell customers/consumers what that is and why, rather than just slapping a green label on it (and possibly committing one or more greenwashing sins). And that’s a good thing.

Knowledge Based Sourcing I – Booz Allen Steps into the Next Level Ring

BravoSolution. CAPS. Greybeard Advisors. The MPower Group. Purchasing Practice. Tompkins Associates. Sourcing Innovation. And now Booz Allen. The Next Generation Sourcing Ring is staring to get a little crowded with combatants each offering their own take on “Next Generation” Supply Management. But that’s a good thing. Until recently, there weren’t even enough combatants to have a tag-team match!

So what is Booz Allen bringing to the Next Generation Sourcing Rumble? A competency consisting of a set of powerful techniques used to identify high impact value drivers that result in increased understanding and knowledge of ‘ideal’ cost structures that can be used to develop better relationships with suppliers, focused on reality based improvement plans, and gain an ongoing business advantage. This is a good goal.

In addition, Booz Allen claims that this approach is fundamentally different from traditional “market-based” sourcing approaches that are focused on embracing supply markets’ competitive context and/or obtaining the best competitive outcome possible, primarily through pricing. According to Booz Allen, its “Knowledge Based Sourcing” (KBS) approach is predicated on a deep understanding of cost drivers, the supply market, and spend category context. This is a good foundation. After all, it’s not spend that matters, but the underlying cost. Shaving 10% off the top is dismal if the organization is overpaying by 40%. And telling your team to save 10% again this year when underlying costs have gone up 40% and the production cost is now 10% more than what you are paying is foolish.

So how does Booz Allen define KBS? By its characteristics. According to Booz Allen, Knowledge Based Sourcing:

  • uses the supply base as a key competitive advantage
    (presumably) because this enables long-term success through (financial) supplier stability instead of unstable short-term gains from supply base exploitation
  • continuously improves to eliminate supply chain waste
    because raw material and environmental costs (associated with water and power) are going through the roof and waste is costly
  • integrates (internal & external) relationships
    because this leads to collaboration, which in turn leads to innovation, that is not possible with combative arms-length relationships
  • shares knowledge
    because all partners need to profit in a successful supply chain
  • sets and meets targeted costs with supply partners
    as success relies on continual cost control and cost reduction
  • is improvement focussed
    as an organization that stands still will soon be over-taken by the competition
  • ensures suppliers are at an advantage over market
    as this is the foundation for using the supply base as a key competitive advantage
  • continually drives best practices through the supply base
    to ensure that all supply chain partners improve in lock step
  • is driven by knowledgeable procurement professionals
    as talent is the ultimate key to success
  • aligns suppliers with customer success
    as Supply Management must enable its customers to succeed if it is to succeed

It’s a good definition for Knowledge Based Sourcing (KBS) and a solid entry into the Next Level Ring. Now, if only we could get the combatants to agree on a name. So far we have “High Definition Sourcing”, “VFS” (Value Focussed Supply), “Next Level Supply Management”, “Next Practices”, “Supply Management Transformation”, “Supply Chain Leverage”, “Next Generation Supply Management”, and “Knowledge Based Sourcing”. But the foundations of each message appear to be the same — in order to continue to extract value from supply management, it needs to be taken to the next level. A next level that is knowledge-based, analytics driven, and result-focussed.

So who’s going to throw their hat in the ring next? Hard to say. For now, we’ll explore Knowledge Based Sourcing further over the next few days.