This post originally ran on March 10, 2011. However, it is still as relevant today as it was then and, for those of you who did read it before, not too much of a distraction to you as we approach the World Cup Final 😉
Today’s guest post is from Paul Martyn (VP of Marketing), who can be reached at p <dot> martyn <at> bravosolution <dot> com or 312 279 6793 and who recently penned a guest post on Achieving Category Excellence with High Definition Sourcing, to look ahead three years when High Definition Sourcing and Next Generation Sourcing Techniques (which include Value Focussed Supply Management Techniques) are commonplace in the leading Supply Management organizations and put together a picture of what e-Sourcing might look like.
It’s 2014. I’m a senior sourcing professional at a large multi-national company and I’ve got major sourcing programs planned for categories that share the following characteristics:
- Large amounts of spend
- International, operational, marketing and/or finance stakeholders
- Complicated cost models
- The category leader is frustrated with traditional sourcing techniques
- The category is avoided by the faint of heart
- Dynamic corporate, supplier, and market conditions
Sound daunting? Maybe even impossible to succeed? Three years ago, I would have shared your skepticism and been completely frustrated by the sheer complexity of tackling these challenges. When I look back, there was a lot holding me and my team back, including:
- A one-size-fits-all approach to sourcing:
For successful sourcing of complex categories, what my team really needed was the ability to define the world of their particular category. A flexible framework would allow us to state the opportunity/problem, gather the necessary inputs to evaluate possible reactions, make a decision, and track the implementation and monitor the changing conditions around the decisions we’ve made to constantly take advantage of changing realities — all while staying consistent across the organization.
- Silos, silos everywhere and not a bridge in sight:
The conventional approaches I used created nonsensical boundaries across functions. I couldn’t get engineering, distribution, supply chain, and customer service aligned or more importantly — involved in the decisions. Worse, we weren’t really in problem-solving mode, these were merely sequenced ‘events’ executed with no ability to create and manage a ‘process’ that ended up as a ‘system’ to manage key categories. All we created were more damn task lists. My category leaders didn’t need more “to-do’s”, they needed laboratories for research and testing, board rooms for decision-making, and a ship’s bridge from which to monitor and control.
- Drowning in useless data:
We made great use of data at first, but wrestling with it was so manual and there was no way to easily refresh it. It very quickly became like a can of soda: when first opened, it’s great, but the longer it sits, the flatter — and less useful in providing relief — it gets.
So what’s changed? I’ve used ‘High Definition’ Sourcing with category specific ‘Business Centers’ for complex categories. With this sophisticated approach:
- Category managers have a panoramic view that allows them to manage their categories, end-to-end with regards to
- defining new opportunities/problems
- gathering a full spectrum of metrics to use in evaluating potential solutions,
- establishing, monitoring, and tracking of key decisions to highlight deviations from expectations
These three (3) parameters form our ‘system’ for managing complex categories, where the stakes are high and the opportunities for value, even higher.
- defining new opportunities/problems
With a category management Center of Excellence we have two critical resources for successful management of high-definition sourcing:
- A Data Management Guru (DMG) responsible for the data capture and informatics. The DMG establishes connections to gather baselines; refreshes usage and capacity details; links to spend sources for up-to-date consumption figures and arranges performance data aggregation and design.
- A Business Intelligence Management Professional (BIMP) responsible for configuring the new analytics necessary to analyze key categories within an initiative. Every problem is a little different, and the right analytics are crucial to making the right decision.
As a result, my sourcing tools can
- Flexibly define the problem opportunity for a specific category
- Utilize robust data sources to feed the evaluation and performance processes
- Allow creative scenarios to complete the evaluation process
- Support the determination of specific decisions and actions
- Establish KPIs for tracking ongoing performance
- Effectively report the impact of our initiatives in terms (EPS/Profit Contribution) the entire organization understands
All in the context of a given category.
And the return on investment for the staff augmentation and additional tools? An additional 5-8% savings in my most strategic categories, an overall improvement in my supplier performance post-contract, and an overall reduction in organizational risk by involving all of my stakeholders, their key data inputs, and constraints.
My only regret: I didn’t do it sooner.