The Procurement Game Plan: A Review Part I.2

Charles Dominick of Next Level Purchasing and Soheila R. Lunney of Lunney Advisory Group recently released The Procurement Game Plan: Winning Strategies and Techniques for Supply Management Professionals. In our last post, we set the stage with The Purchasing Professional’s 10 Commandments. In this post we’re going to continue our fairly detailed review of this book, which will span four or five posts. We’ll start by covering the first four chapters of the book that discuss organizational role, supply management strategy, talent, and social responsibility — the stage that a modern supply management professional has to act upon.

The first chapter on Procurement’s Place in the organization starts out with an overview of management’s expectations of modern Procurement — something every Procurement Pro needs to know when finding a (new) job in today’s highly competitive skill-based marketplace. We’re well beyond the time when all that was expected of Supply Management was cost savings. Now, with costs rising and consumer belts tightening, Supply Management is also being tasked to deliver productivity improvements, brand & differentiation support, customer satisfacation, cash flow improvements, great service, competitive advantage, and sometimes even revenue. It’s a tall order for a single organization — it’s good that the strategies and tools exist to deliver. (And that’s kind of what this blog is all about, but the doctor digresses.)

The chapter then dives into the types of goals that Procurement / Supply Management organizations have, and this is where the value of the book starts to kick in. Organizations, depending on their stage of maturity, either have no (documented) goals, which is very bad, vague goals (with no meaningful measurable targets), which is bad as a professional will not know how important each goal is relative to other goals, SMART (Specific, Measurable, Attainable, Relevant, and Time-Bound) goals, which are good and a minimum requirement for organizational success, or Strategic SMART goals, which are great as they also tie the SMART goals to overall organizational strategy. A world-class supply management organization puts the good of the organization before the good of itself.

The chapter also discusses strategic vs. tactical procurement, Procurement as a Profit Centre, Procurement as a Service Centre, and Procurement’s Role in Specification Writing — but the other key section of the chapter is The Procurement Manifesto. Because it can be difficult to gain buy-in from functional departments when trying to get them to accept Procurement’s involvement, it is important to have a list of reasons why it will benefit them to work with Procurement. Your Supply Management organization should have such a list and should describe then in The Procurement Manifesto that can be given to the other organizational units. For details on what to include, see the book.

The next chapter discusses Supply Management Strategy — The Procurement Playbook if you will. The existence of an appropriately written guiding document will help keep the organization on the same page and help it to achieve its goals. Such a document must contain the following five sections in order to meet the department’s needs:

  1. The Procurement Organization’s Business Plan
  2. The Procurement Organization Structure
  3. Cost Control Strategies
  4. Risk Management Strategies
  5. The Supply Management Sourcing & Procurement Methodologies

Each piece of the puzzle must be clearly defined and outlined, and each organizational member must be on the same page. For details on how to write the Procurement business plan, on what types of cost control strategies to focus on, and what types of risk management strategies might be included, see the book.

One of the key parts of this chapter is the section on standard supplier selection criteria. The authors note that you should use a hierarchy of constraints and criteria every time you select a supplier. That hierarchy must include all of the relevant selection criteria, ordered and weighted so that each supplier can be compared fairly. This is sometimes the only way to determine which supplier will be the best fit for an organization. Generally speaking, this hierarchy should contain cost, value, quality, service, social responsibility, convenience, risk, and agility at a minimum, with other factors added depending on the goods or service being sourced. The weightings and rankings will be project specific.

The next chapter on Procurement Talent Management is one of the key chapters of the books and contains one of the key messages, talent is key to success. Without it, no amount of technology or transition management will help. It does a great job of discussing the five facets of the talent management cycle — Assess, Retain, Develop, Recruit, and Unify — and how each is necessary for organizational success. It also points out that they are not sequential and, depending on organizational needs, they may all need to be addressed simultaneously. Not only is talent management more important than many organizations prioritize it in their key issues list, but it is more difficult than many organizations would lead you to believe. This is a chapter to be reviewed in depth as almost every point matters, but a key point it addresses that is often missed is that education is a retention tool. Real professionals want to learn and improve, and will value an employer that not only allows them to do that, but that sponsors their education and efforts to improve themselves. The value of educating a resource is many times the up-front investment. Many, many times. The only point I’d disagree with in the entire chapter is the statement that by working with the business schools of the universities in your area, you can hire (at no cost/credit only or at minimal cost) intelligent and hard-working interns to take away the burden of tactical work from your strategic sourcing team members. While it is true that you can hire these intelligent, eager, hard-working resources at little-cost to do just this, they will need regular supervision from your senior Procurement Professionals, and this is a hidden cost you will need to account for.

The next chapter, and the final chapter that we’ll cover in this post, is on social responsibility in procurement: the new rules for a more responsible game. Whether this is important to your organization now or not, it will soon be as more and more consumers demand environmental or social responsibility, so you better get a handle on how it is going to impact your organization now, or you’ll be scrambling later when the media has you under the gone. Not a situation any Supply Management organization wants to be in when they can eliminate the risk with some careful research, planning, and a social responsibility program – which may not have to be all that extensive or demanding.

One of the key points covered by the chapter, which is often missed by other books, is ethics. Not only does social responsibility start with ethical behaviour, but a perceived lack of ethics, real or not, can land you and your organization in hot-water. As an example, the authors describe some recent government scandals, including one that got their mayor in some very hot water. In 2007, Mayor Luke Ravenstahl accepted two days of golf in the Mario Lemieux Celebrity Invitational from UPMC and the Pittsburgh Penguins, valued at $9K. His defence is that while the city’s ethics code limited city officials to accept admission to cultural or athletic events valued at $250 or less per year, charitable outings were exempted. This may have been a charitable event, but it’s value created a perceived conflict of interest that landed him in very hot water with the media. Then, a few months later, he decided he wanted to accept free tickets to go to a Stanley Cup Final game against the Detroit Red Wings. This time, he asked for an official legal opinion first, but it didn’t matter because the ticket value was very high and another councillor said he made half of the Mayor’s salary and pays for his hockey tickets out of his own pocket and the mayor should do the same. The lesson is that even if you don’t violate the ethics or gift acceptance policy of your organization, if there is any chance your actions could be perceived by a (large) group of people as unethical, you probably shouldn’t do it. And if you have to think about whether or not something is ethical, and, even worse, think you have to ask permission, just don’t do it.

The sections on the supplier code of conduct, green procurement, and supplier diversity, which for the most part cover all of the basics, are also quite good and worth a careful read.

That’s it for Part I. In Part II, we’ll discuss the next four chapters on Strategic Sourcing, Supplier Qualification, and Negotiations. Stay tuned.