Daily Archives: December 17, 2014

Procurement Trend 04. Control Tower Model / Omni Channel Approach

Only one anti-trend remains. Once we finish this post, we complete our formidable burden, and hope that the sour taste in our mouths will soon depart now that we have shown those fictionally-focussed futurists in fine detail that the snake-oil trends they have been selling have no worth. We want to abash them for their apathy, but we will leave it up to LOLCat to decide their fate. While LOLCat thinks on it, he would like to point out to these Rip van Winkles that when it comes to sleeping through life, No One Out-sleeps a Cat!

So why do these analyst catfish keep churning out the same lousy predictions year after year? Besides the fact that light rarely penetrates down to where they are, it’s probably because they look around, see the laggard organizations still struggling with the best way to organize its operations, and assume they can still sell last decade’s playbook in this decade’s marketplace. Thus, if most organizations are still fighting to get beyond the de-centralized model, then the control tower model sounds quite futurish. Plus, we have the situation where its

  • different strokes benefit different folks
    as different models work well in different circumstances
  • integrated channels result in integrated data feeds
    and more data results in better decisions
  • regional differences not only provide opportunities,
    but can hinder success with the wrong model/approach

So what does this mean?

Understand the Primary Models

There are three traditional models of Supply Management: decentralized, centralized, and center-led. In the decentralized model, there is a Supply Management team in each organizational unit responsible for purchasing for that unit. This model has advantages, primarily along deep knowledge of supply market and needs, and deep disadvantages, primarily with respect to the inability to exploit organizational spend. In the centralized model, all spend is centralized through one Supply Management team. This model has its own set of advantages and disadvantages, many of them diametrically opposite to the decentralized model. In the center-led model, there is a central Supply Management team which defines the categories, identifies the best sourcing methods, executes the contracts, and guides each department on how to procure against the contract. It is supposed to combine the best features of each model.

Understand where Each Model Fits

Each model has its uses. In an organization where most buys don’t cross organizational units (with respect to product needs or supply base), decentralized can work. In an organization which has primarily indirect spend that is common across the organization with a strongly overlapping supply base, for example, a centralized model is a best. In an organization with a mix of common and uncommon categories and suppliers, a center-led model where some spend is centralized and some spend is left up to the individual organizational units is often the way to go.

Understand Centre-Led vs. Center of Excellence vs. Control Tower

They are all similar, but they are not the same. Center-led is where a central organization centralizes some spend but leaves other spend up to the individual departments. A Center of Excellence may do the same thing, but it centralizes sourcing knowledge and best practices and, where appropriate, works with and guides the organizational units on decentralized spend to make sure they always apply best practices and get the best results. A Control Tower is a next generation Center of Excellence that not only manages both centralized and decentralized spend, but continually re-evaluates centralization and sourcing strategy and adapts the model with the market to generate the maximum impact for the organization.

Pick the Model that is Right for Your Organization

Arguably, the Control Tower model is best in theory, but pick the model that best fits your organizational needs based on where it is with respect to Supply Maturity.